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VOL,VIII, NO, 2

THEAIAN

I\4ANAGER APRIL/MAY I995

COVDR STONY

NDSBANOH

for JointVentures6 NegotiationStrategies

Are StockPricesRandomor Not?

V. Soriano, AIM byProfessor Emanuel Countervailing controlsarea mustto preparefor partnerships. in cross-border negotiations, especially

ErrolB.Perez, AIM byProlessor Doestechnicalanalysisreallywork' BOOK NEVIEW

MANAGDMDITIT IJPIIATDS

Kaizen byProfessor Rene T. Domingo , AJM Canyou delivera consisttint QCDmix? TQ deliveron all three. companies byProfessor QuintinC. Tsn, AIM canbe taught. Entrepreneurs

bySindhuKhullar,VisitingFellow SindhuKhullardefines"Govgrnance."

SWASembada byH.B.Srpiyo, An AsianwritesaboutAsiansfor the Westernmind. BUSINDSS AND THN ANTS

Development

byProltssor EnricoC. Angtuncl,AIM oI timemanagement. Stephen Covey'sfourthgeneration

AsianMind Game

Entrepreneurship

FirstThingsFirst

MntagePhotoCollection

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CatamyProperties Geronimo De losREes,Chnirman, circa1880to 1930. A rarelookat Manilabusiness, TAX SI,'RVDY

HRD AIM MarioAntonioC. Lopez, byProfessor Scientificto humanisticto competitivemanagement.

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AFTA Mari Kondo, AIM by Prolessor OPINIONS

BUSINDSS NXVIDW

of theFuture TheOrganization

AIM A. Mendozs, br1Professor Gabino workers. Eiitetioopsandtemporary

AIM BrnjaminC. Bagadion. br1Prsfp,.<61 liow to deployan environmentpolicy for Profit.

Copvright@1995by The AsianMtn.8.r All riShlsreerved Reproductionrn anJ nanner in 1!hol.or in Parlin Englishor otherl.htLnS€s prohibited The Asian\'lana8er,rspublished bi monthlf b), the Asian Institutc oi M.nagement Editori.rl trnd Advertislng O1fice:Asian institut. .i Management, lu8cnio La)perfoundahon, Jokph R M.Micking CamPus, lzil Paseode Rorrs, Makiti, Metro Manil., PhiliPPines.Tell (632)8e240 ll 25;89204 35'.13,Far: (632)81792 10 Photo g.nphsso!r..d blthe AIM Libnrf Pintcd bv Times frinte.sfte Ltd, SinSnPore The Asinn M.n.EefMITA (P) 24419/91 I55N 0l lr'-77q)

THEAsrANMANAGER. APRIL-MAY1995

47 49

ThinkAbout It

It Paysto ThinkGreen 40 GreenPastures:

THFAsrANMANAcER A Publicationot the Asianlnstituteof Mrnagement and ihc Fcde.anono1 the Asi.h lnsnhrl€ oi Manrg.mcnt Alumni Asso.iations

MisguidedMorality byDaridA. Heenan Professor lr., AIM lesusC. Gallegos

MoneyMatters

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Prbltuh.r FelipeB. Alfonso RicardoA Lim CcPrbllsher & Edltor.tn{hlef Dlterlor ftdoalrte Publlshe. & .{drer.ktng DeliaC.Cutierrez [lnr.or. Operrrlons & (lrcuhdon Millie C. Ferrer

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tuck in a Manilatraffic that peoplewere "happy" fl Economistshave meas- nesecars.In Japan,countthe j a . t t ' r eo t h e r d a y , I and..,prosperous.Well,this u r e d h e m l i n e sa s s i g n so f n u m b e ro f A m e r i c a n \ cars, \./ couldnot helpbut no- is not Nobel Prize matedal, wealth. Thetheorygoes;the Lincolnsor Corvettes, andthe ticetheplatenumberof thecar but it will do. shortertheskirts,thehappier sameconclusion is true,forthe in front of me: UAB-310or Whatotherprosperityin- theirwearers andadmirers are japaneselike to haveAmerisomething.I had the urge to d i c a t o r sh a v e e c o n o m i s t s (?),because theyhavehigher canstafussymbols. Purinahas impute somesignificancein used,shortof measuring GDP incomes,and thereforewill erecteda "PuppyChow" dog that platenumber The great and price indexesand bal- havegreaterpropensitiesto food factoryoutsideManila. Indianmathematician Rama- ancesof payments?Ameri- spend;long skirts,theoppo- The companvhopes,I surnujan had parsedLondon canshavecorrelatedthe re- sitereigns. Thiswas proven mise,that Filipinoswill feed taxicabnumbersfor exotic sultsof their SuperBowl to by the "Flapper" years in thelr pets more expensive primenumbercombinations. processedfood, rather than Ramanujan wasapuregenius tablescraps.InSingapore and whocouldtwirl theconcept of HongKong,bothprosperous infinitylikechild'splay; I was c i t i e s , p e r s o n a lc e l l u l a r looking for somethinginfiphonesarederigeur,and are nitelymoredown-to-earth, becoming morecommonplace Manilalicense platesinthe in Bangkok,Jakarta,and Maseventiesstartedout with nila. Moreconspicuous con"NAA-000."The government sumption,andmoreexpendidoledtheseout in orderuntil tures for heretoforepostall 676,000"N" combinations ponabledecisions. were exhaustedon new car Check the fabric and registrations. InFerdinand colorspeoplewear-yellow Marcos's timegasoline andcar silk, for powerand prosperpricesballooned,and people ity, red and darkercolored stoppedbuying new autos. polyesterfor the opposite. The"Ns" stayedaroundfor a M e a s u r et h e l e n g t h s o f while as the Philippineecoqueuesat departmentstore nomystagnated.WhenCory cashiers, and the numberof Aquino cameto power the shiny vs. dull shoppingbags next sequence of "P" license the customerscarry around. platesstartedflying in. With Forme,foodis anunbeatable FidelRamos'snew economic indicator:I measuretheratio programs, thechangeseemed of shavedice to icecreamin to accelerate.We whipped mv hslo-haloor rcedkacang, throughthe "Ts" which indicateshow grand in lessthan one stock market per- America,of short skirts and shopkeepers feelin theirwillyear,and now I formance. If the free-flowing extravagance. ingnessto add more quality Purina hopes am gridJocked NationalFootball When the Depressionhit in to their desserts. behinda brand thatFilipinos Conference wins, 1929ladieslengthenedtheir A h , p r o s p e r i t yh a s i t s new HondaActhe theory states, until theirankles. hemlines In drawbacks. It hastakenme willfeed their then bull markets cord with a "U" World War II the skirts got two hoursto write thisarticle, p l a t e ,( W h a ti s petsmoreex- will ensue; if the shorter,andculminatedin the aboutthetimeit takestotravel more galling AmericanFootball sixties,when "micro-mini" the 16-kilometer round trip pensive food, than the traffic sidewins,thebears skirts were the rage. The betweenmy homeand AIM jamis thatI have takeoverIn thebe- studiesstopafterthatperiod, during rush hour.Manila's andnot a not-so-shiny ginningthe theory because Frenchdesigners trafficwill soonbe asbad as tablescraps.worked well. For weregummingup the colle- Bangkok's."Life is not that Toyota Corolla with anearly"P" the last ten years, lationbydesigningall sortsof badafterall," I sighin poetic plate.) I imagineManileiios however,the National Confer- hemlines,with blatantdisre- justice,astheshinynew "U" tookaboutthreeyealsto pass ence had won an inordinate gardfor economictheory. HondaAccord creepsalongat the "Ps." Fromthat simple number of titles, America's Here are some other t h e s a m er a t e a s m y o w n benchmarkI concludedthat economyhad goneinto reces- "quickanddirty" indicatorc of clunker our prosperitygrew at three sion (and the stockmarkethad wealth:Countthe numberof timesthisyeartherateof pre- crashedin the meantime),so BMWsand MercedesBenzes viousyears,that peoplehad out the window this theory o n a n y A S E A N c o u n t r y ' s Pnf. Rickv A. Lo tcach$.slT and Mana:lentrnt Cononun icatiorlfol th. moneyto spendon new cars, goes. road, in proportionto Japa- EDP awl MBM programs.

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Negotiation Strategies forJointVentures he scarcityof raw materials,the mustbe consideredin theirentirety rvhen thrustfor sustainable develop, negotiatinga joint venture. ment,theformationof theNorth The viewpoint of a localcompanyhas American Free Trade Area (NAFTA), WTO-GATT,APEC, and the Asean Free Trade Area (AFTA)-all underscorethe phenomenonof interdependenceand the needfor healthvlinlage. amongorgrnizatlons. How do we promote thesehealthv linlage.o . r ' r ri n - w i n r e l a t i o n s h i p ' ) Joint venturesbetrveenlocal and foreign partners have been the responseto interdependence. Someexperienceshave beensuccessful; othershavefailed.As the force for interdcpendencebuilds up, the need for mutualiv beneficialjoint ventureswould alsobuild up. This is trr.refor countdesin Asia.Thus,managersin these count es ought to develop skills to negotiate maturelv and effectivelv so thev can forge sustainedjoint venturcs. lcnture Slakeholders We must considerthree basicpoints of vieu': . The Point of r,'iewof the local com Pany . The point of view of the foreign companyand r The point of view of the host government and the government of the forelgn partner. Two of the threc interactingpoints of vierv are shownbelolr'.Theseviervpoints 6

many aspects: . Accessto patentsor manufacturing rights r Use of trademarks . Additionalmanagement expertrse as and ryhen needed . Adyice on trends and stvlesas rvell as a product deveiopment . Accessto foreign marketing channels

Elementsof Control

. Financingand rTechnologvand productir.itVirr provemcnr On a caselo-casebasis,one or two ot thesecomponentsw ould be more important than ihe othcrs to the local conpantr The viervpointof the foreigncompanv addresses otherkev arcas: . Penetration of localorregionalmarket and protectionof market share . Establishment ol a nanufacturing ba'e rr hich pro\ iJe. cert,tin,tJr',rniage(e.g.,labor, land,anclothercost

L o c a lC o m o a n y F o r e i q nC o m o a n v

Ownership Domesticmarketing Export marketing l,4anufacturing Technology& research Key people (excepttreasurer) Treasur6r Domesticpricing Export pricing Ouality control Suppliers(imported raw materials) Hiring/firingstaff New investments D i v i d e nd s Variouscredit lines (foreigni

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APR]I,.M,\Y I995 . THEASlA\ \,'ANACEIt

considerations)and . Accessto raw materials The foreign company'sinterestshould be seenin the light of certain considerations.First, the foreign companymust not "big brother," or a be looked upon as a charitableinstitution. Second,unlessprohibited by law, the foreign company usually prefers a majority equity position in the joint venture. Third, the foreign company puts a premium on minimizing risks: early payback projects, minimum exposure to foreign exchangerisks, and non-cashcontributions such as patents and trademarks,rather than direct investments. In unstablepolitical situations,the foreign company looks to a joint venture as protectionagainstsuddenchangesin the host government'spolicies,e.9.,nationalization. The government'sviewpoint is no less important. Usually,governmentslook for implicationsof joint ventureson: o Promotionof socio-economic progress . Technologytransfer o Balanceof payment effects ' Employmentgeneration . Collectionof taxes . Competitivenessof the country and . Responsibleuse of the natural and other scarceresources. A favorable balanceof payment would be welcomed by a host government. Other plus points from the government's perspective are training for local manpowet substantiallocalcontentof the product, and transferof appropriatetechnology. One must reconciletheseviewpoints when establishinga joint venture.It is safe to assumethat the government'sviewpoint is fixed over a longer time. Thus, flexibility in negotiation must comefrom the prospectivepartners in terms of willingnessto modify their viewpoints within the tolerable limits. It is to this processof influencingeachother's point ofview that the rest of this paper is addressed.

systemot'clunteraailingclntrll. Negotiating and establishing a joint venture is not a"zero-sum" gamei.e.,one gaining at the expenseof the other.A relationship based on zero-sum may work in the short run but will be untenable in the long run. One party may agreetemporarily simply becauseit is forced into the relationship, but looks to the day when the relationship will end. A balanced system of countervailing controls makes possible a continuing senseof net gain on the part of the joint venture partners,Ownership control is a key of the relationship. There is a broad range of other elements to the relationship: marketing control, manufacturing control, control of technology and re-

keypeople,pricsearch, ing, quality,controlof suppliers,hiringandfiring of staff,decisionson new investments, and decisionson dividends. Thus, even if one party has 95% ownershipof thejoint venture but the otherparty has 100%controlover export marketingactivities,countervailing control is saidto exist.Similarly,onepartymaycontrol quality specifications as well as new technology and research;the otherparty may control accessto raw materials.Again,

Negotiation Posture Thefirst key approachto negotiation is adoptinga goodnegotiationposture. Therearefive typesof postures: o Cooperation o Conflict r Containment r Powerrelationshipand . Accommodation postureis the Ideally,thecooperative mostdesirablefor both partiesto adopt.

Theforeign eompary mast not be looked upon as a "big

brothen" or u ehurituble

institution.

countervailing control exists.Thus, given a range of elementsof the relationship, if one party is in control of a set of elements or sharescontrol with the other party and, on the other hand, the other party is in control of the remaining set of elements, countervailing control is said to exist. The countervailing control system in a joint venture may, therefore,look like what is shown in Table 1. The arrangements in Thble1 are what parties negotiate over when setting up a joint venture. Subsequently,during periodic reviews of the agreement,the partiesstrive to modif Win-win and control or strengthenthe relationship in order to A viable joint venture must have two basic elements,without which it cannot preserve that senseof net gain that parbe establishedon a long-termbasis.First, ties to the joint ventures must have if the nll partiesto n joint aenturemustt'eela sense relationship is to remain viable. Negotiations will not bear good fruit unless the the tie-upffiusthnoea ot'net gain. Second, . APRIL-MAY 1995 THTAsIqNMANAGER

partiesenterinto it with a high degreeof maturity.Maturity comeswith familiarin thenegotiation procity andexperience ess:namely,posture,flexibility,negotiation rules,influence,and thenegotiators themselves.

Negotiation in the cooperative mode proceeds on the basis where both parties share mutual areas of interestand arewilling to work together towards giving effective attention to theseareas of mutual concern. Negotiation under the conflict posture is the most undesirable. It is done under conditions where one party is forced to accepta relationship becauseof circumstancesthat are temporarily out of control and looks forward

to the time when the joint venturewill no longerbenecessary, Negotiationunder the containment postureis whereone party tries to get into a dominantpositionand the other strivesto counterthis by keepingthe otherwithin certainboundaries. in thepowerposturedeNegotiations velopsa relationshipon thebasisof who haseffectivepowerto influencetheother party'sposition. Negotiationunder the accommodation posturedevelopsa relationshipon thebasisof giving in with respectto minor pointsbut holdingfirm with respect priorities. to certainorganizational Flexibtlity An important precautionto guard againstin negotiationsis to avoidall-or-

nothingor take-it-or-leave-itsituations.It is conharyto humannature.Thismindset must be canied over from the negotiating tableto thejoint-ventureoperationas it is implementedby the local company and its foreigncounterpart.In a negotiationsbetweenanAmericancomoanvand a Philippinecornpany,talks sta;tedwith veryhigh tensionbecause theAmerican panelusedthe "takeit or leaveit" approach.TheAmericanpanel felt the approachwas honestand up-front.They wantedtodelivera message: theyhadno hidden agenda.However,psychologically,the Philippinepanelwantedto feel that the Americanpanelhad given in on somepoints.This not beingpossiblg the talks were discontinued.Both companies' positionswerereally compatible, but thenegotiatingposturesweresofar apad. This is a casewhere telling the truth up-front didn't seemto work.

gotiatingpoints,if theyarecrucial,require a lot of hornework,study, and research. They haveconsequences on other negotiating points.Therefore,bringingup new points by surprisecausesirritation. Theagendarule suggesisthatthevery optimisticfirst offer and the relatively pessimisticcounter-offersetsthe agenda for negotiation. lt setstheIimitsfor negotiation. Preferably,no further negotiating point shouldbe inhoduced.The rationale for this rule is to preventan unintendedbreak-off. The tentativeagreementrule suggeststhat as the negotiationprogresses, agreementson various points are tentativeuntil agreementon all pointshasbeen

mutually beneficialagreementis possible,because theserulesarenotfollowed.

Inlluenelng each othert l'lewpolnt A rich menuof tacticsis availablefor negotiations.The processof influencing the other's point of view is describedin Figure 1. Figure 1 showsthe local company As and the foreigncompanyB's positionsbeforenegotiations start.Both companies, however,have certainminimum positionsunknownto theother.The negotiationprogressesasA influencesB to reduceits aspirations,and vice versa. Throughthis mutualinfluencingprocess, the partiesattempt to reacha minimum point, the "Zone of Agreernent" or ZOA, a mutuallyagreeable point to both partieswhere they still feel a Ideal Ideal senseof net gain.It is in avoidinga position position prematurebreak-offat points above for A for B theZOAthatmaturenegotiation mles Unwrltten rules areuseful. ol negotlatlon How doesonepartyinJ:luence the The objectiveof effectivenegotiaother'spointof view? tionsis to avoid the unintendedbreakCertainnegotiahng tacticsmaybe off. Implicit in this objectiveis the asusedby bothpartiesprovidedtheyare sumptionthatsincere, maturenegohaused within the contextof the rules tors want a mutually beneficialagreediscussed earlierIf usedjudiciously, ment,if it is possibleto reach.Toward these tactics will enableboth parties ZoneofAgreemenr(ZOAI this end, rulesarenecessary: to inlluenceeachother'spoint of view' o Theinitiation rule . Sharinginformation . Thedemandrule . Persuadingand rationalizing . The agendarule o Coercing(i.e.,limitingpossible A-+ZoA<--B . The tentativeagreementrule outcomes) . Thedeadlinerule and . Usingsign language Fig.1 o The terminationrule . "Tradinghorses"and Theinitiation rule suggestsihat neo Committinggradually gotiationsbe startedor higgered by a Sharinginformationis usedto exneutralsignalor person.Thisis needed reached.This rule preservesthe flexibil- pressone'spreferenceaswell asdiscover sothatoneparty maynot beforcedto pre- ity of both partiesand helpsavoid take- the other's preferenceswithout actually maturelyshowhishandandgivean im- it-or-leave-itsituations. making an offer or a commitment.New pressionof weakness.Starting negotiaThe deadlinerule is intendedto pur information tends to affectone'sassesstions is both a threatand a sourceof oo- pressure on thenegotiatingparties.This ment of the situation.Thus,for A or B, it portunitiesto both parties.Therefore, it is importantbecauseotheralternatives rnay influence them to move toward should be started by rneansof a muhr- haveto be exploredif no agreementcan ZOA. ally safesignal. be reached.Moreover,the negotiation Persuadingand rationalizingis used The demandrule suggeststhat the may be overtakenby unforseenand to activelychangetheother'spreferences party makingthe first offeris expectedto unfavorabledeveloprnents beyondthe as well as affectthe other'slevel ot exaskfor its maximumadvantase but with conhol of both oarties. pectations.Using Figure2, persuasion * :. a lot of room to fall backwhen necessary. lhe ternunatlon rulesuggests thatne- and rationalizationis an activeeffort to It also suggeststhat the party receiving gotiationsend when agreementon all makeA & B travel to the ZOA. Studies, the first offer is expectedto give a coun- points hasbeenreached. credibleresearch,and feasibilitystudies ter-offer that is ideal for them. Both ofThe foregoingrules are unwritten. are useful in persuadingand rahonalizfers,however,shouldnot beridiculously However,they help inject maturity and mg. unrealistic.The rationalefor this rule is rationality in the negotiationprocess. Coercingis a tactic where oneparty to preventan unintendedbreak-off.Ne- Oftenhmesnegotiationsbreak,evenif a limits the possiblealtemativeswithout 8

APRIL-MAY1995 . Tt{E ASIANMANAGER

AcovIPLE-TE coURSE oNHoWToBEA .,COMPLEAT MANAGEP'

R E D I S C O V E R I N GA M A N A G E M E N T C L A S S I C : THE TITTAEIESW S RITINGS OF PROF. GABY MENDOZA BY ROBERTO. WRIGHT Professor Mendoza(whoalmostfell preyto a heartattack hims€lore(ountswhatLeeIaccoca hasto say|"l'm constantly amazedby the numberof pmple who can'ts€emto control their own schedules.Over the years,l've had manyexecutives cometo me and saywith pride: Boy,lastyear I workedsohard thatI didn'ttakeanyvacation.' It'sactuallynothingtobeproud of. I alwaysfeellikeresponding:'You dummy.Youmeanto tell me that you can take responsibilityfor an $80million project and you can't plan two week out of the year to go off with your familyandhavesomefun?' '"Youcan'tlet a corporation tum into a laborcamp.Hard work is essential.But therds alsoa time for restand relaxation, for goingto seeyour kid in theschoolplayor at a swim meet. And if you don't do thosethingswhile thekidsareyoung,there's no wav to makeit uDlateron-"

Recently I cameacrossthis collectionof Professor Gaby Mendoza'swritingsin thebook,Managetnenl me AsintlWIV. I startedreadinga few pagesandendedupreadingtwo thirdsof it. I couldn'tput it downl lt's a iruly enjoyableread.It's also item. boundto becomea collector's

GOLDEN NUGGETS OF MANAGEMENT WISDOM Anyonewho readsMdrasemtnlTheAsianWay,will benefit from Prof,Mendoza'sdecades of expedence aspresidentand deanof the AsianInstituteof Management and asa managemenlcon.ultdnt lo theregion. moste\,ellentcompdnie\. Fore\ampleyoull getinsights on howto . replicatethewaysof Asia'smostsuccessful managers ' ' PRoF.GABYMENDozA . *pord !.allmdn bu.ine,\ opponunit) . understand thethinkingandmanagement stylesof suc cessful CEOs HOW TO GET A COPY OF THE BOOK . managetime,monet peoplebetter ProfessorMendoza'sbook waslaun.hed a fe\,ryearsago,but the lessons . approach ("thebiggestbangtheory") mana8ement strategic and storiesremaintimelessand valuableto any prcfessionalmanageror exYou'llalsolearn is makingavailablea speciallimitededition ecutive.THEASIANMANAGER . hownodernmanagers canapplyCenghisKhan'sstrategies to today's (hardbound, goldstamped by Professor Mendozahimself) andautographed business wars(alaSunTzu'sTle Art ofWar) Wry as a sewice to you- You can have the book of Managemenl The Asian . howto understand theMarketingConcept andmakemoneybyapplypersonalizedand goldstampedwith your initials on the book's cover.For ing thesimpleprinciplesasshownby theRussian andSingaporean only US$7 (or equivalentconvertiblelocalcurency,useprevailingexchange eramples rates) THEASIANMANACER, telephone f32youcanhaveall this.Pleasecall . how io keepcloseto customers andavoidbankruptcy Attni Vannessa Or send 892{435-43or faxyour orderto f,32-817-9240 Jaballas. . how to becomea responsible corporate citizen your checkor credit.arddetailsto TheAsianManagerBookshelf, G/F AIM . how Hongkong,Taiwan,andSingapore usedrnanagement develop' Bldg.,123Paseode Roxas,Makati,MetrcManila,Philippines. Or clip and mentstrategies to getwheretheyare-Asia'spowerhouse economies sendthecouponbelow: . You'llalsoleamhowhonesw, andkeeping yourvaluesis goodbusiness. Thereare68management vignettes told {writtenbetween1986-1991)all in candid,simpleianguage. And asPrcf.Mendozaremarks, theycanberead "Westernstyle,systemafically, arrowstraight,from coverto cover..Orthe Asianway,startingfrom the ba.k, or the middle,or whereyou will, and pickingandchoosin&asyou would dimsumon a lazyaftemoon,whatever strikesyour fancy." A GOOD BOOK, LIKE A GOOD MOVIE, SHOULD MAKE YOU THINK ABOUT YOUR OWN LIFE. ProfessorMendoza'sbite sizevi8nettes of thedilemmas, issues,challenges manageEfacewill makeyouthinkabout andopportunities thaitoday'sAsian Heusesexamples vourown lifeasa manager. ofrealpeople,includingsome t'ell knownandadmiredprofessional managers, from Washington Sycipto Leelacocca. One of my favoritesis how Prof. Mendozadealswith the issueof "workaholism"in the chapter"What'sIt All About?"He starts..."We, the Asiaaretheworka modernmanagers of thedeveloping countries ofSoutheast holicsof our societies. Weimmerseourselves in our work,areheldin thrall bv it. Weareobsessed with it, possessed by it. And because of it, we suffer from ulcersand high bloodpressure, fall preyto strokesand heartattacks, and moreoftenthan not, wind up with brokenmarriages and shattered. scattered families.But we endureall these,we perdure,we persistin our Wetruly arepenerseoeahrres,we pursuitof "thebitchgoddess, success." managers. ..Whydo we do it?Whydo wepunishourselves so?Our answers (Readthe explanation to thesequestions aremanyand varied.... and about theironvof it all in thebook.)

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Monagenefime Asioti lvdy at US$37per copy. I undeNtandthat this speaialeditioncollector'sitem will be sentto me signedand autographed by theauthorandgoldstampedwith m),initials / on thecover (Please add US$7.00 for handlingand cou-/ier deliveryoutsideMetroManila,Philippines). (checksin Philippinepesosand Enclosed is my checkfor US$_ otherASEANcurrencies acceptable). Please myiniemational creditcard: charge Visa Amex MastercardDiners Others (ph.specify)

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creatingan all-or-nothingsituation.Using one'sinfluenceto makea demandof theotherpartyillegal--e.g.,by gettinga municipal ordinancepassedprohibiting certainbusiness practices-isanexample of coercion. Signlanguageis usedwhenoneparty wants to offer a concession but, at the sametime,wantsto protectitselfagainst a possiblerejection. An exampleof sign languageis whenA requestsB to agree

thatoneparty,sayA, takescertainirevocableincremental stepswhich may lead to a certainirrevocablefinal result in order to showB,gradually,thatit will not reconsiderits position with respectto a certainpoint wherethereis a deadlock. Thisprocess is illustratedin Figure2. This tactic helps to resolvethe dilemmaof oneparty telling the truth, and theother not believing. As shownin Figure2, position I rep-

o Deadlock develops.

A starts negotiation with another company.

A has tentative agreementwith another company.

A breaks off talks with B.

Fig.2

on a point B hasbeenvigorously objecting to in earliersessions andthen,all of a sudden,insteadof objecting, B says, "let usdiscusssomeothermatteriust first and get backto that later" Wthout actually saying so, B has in fact given a concession-that B is willing to discussthepossibility later.A shouldbesensitiveto cues suchasthis. tading horsescanbeusefulat times. Jhis meansthat A should be ready to trade baJgainingpoints with B in exchangefor a concession. Here oneparty discovers what is importantto theother 'Trading horses" is wherethepartiescan concede to a point important to the oiher-but perhapsunimportantto themselves-inexchange for a similargesture. Onepanel,a foreigngroup,offeredthe Philippine panel the position of Vice Chairmanbecausethey werecommitted to give the chairmanshipto anotherforeign partner The Philippinepaneldeclinedbecause theircandidatefor Charrman felt it would diminish his prestige in the businesscommunity.The foreign panel offered to have two Co-chairpersons.Thismovebroketheimpasse. Committinggraduallyis anothereffectiveway of influencingthe other's pointof view.It servesasa signalwhich is sentto indicatethatapointisnolonger negotiable. Essentially, this tacticmeans '10

resentsthe startof thenesotiationanda deadlockdevelops. At poiition2, asa resultof somepatial impasse, A startsnegotiation with anothercompanyas a ftedge. This shouldbe interpretedby B as a signalof As unwillingness or inability to give concessions. If this point is not absolutelycmcialto B'spositioryBshould considergivingin for a tradinghorse,or just giving in. If B wants to probe further-risking a possiblebreakoff-B may makesomeeffort to insist.A may then makeanotherirrevocable moveto Position 3. UnlessB givesin, Position4 becomesinevitable. The man on the spot Onefinal point is important:therole of thenegotiator, i.e.,thepersonor panel representing the localcompanyand the panelrepresentingthe foreign company. During negotiations,onemustremember that negotiatorsrepresenta set of constituents,key peoplesuch as stockholders,top management. In ihis sense,the negotiatoris a delegate until theZoneof Agreementis reached. On a tacticallevel,somepanelswill use"goodguy,badguy" ploys.During a negotiationbetweâ&#x201A;Źna Japanese and a Philippinecompany,the Japanese panel assigned oneof their membersto play a roleunknownto thePhilippinepanel:the

rolewasto be a realhardbargainerand pushmattemto thepoint of breakoff to testthe resolveof the Philippinepanel. However,to maintainflexibility,especially if they wantednegotiations to go on, they wouJdgo throughthe motions of "hing" or "sendinghome"the "erring" panelmemberwho "rnisbehaved" duringthenegotiations. When this zone is reachedand the panelsreachanagreement, thepa-nelist's roleschange. They mustnow becomealliesin "selling"theagreement to theirrespectiveconstih-rencies. The negotiators now cooperatewithout weakeningtireir positions,so that ihe agreementis acceptedby thosethey represent. This is necessary evenif they havebeengiven full authority to bind in their respected companies. Interdependence is an irreversible phenomenon. Consequently, healt\ joint venturesare neededin largenumbers. Managers andleadersmusthavenegotiatingskills,andtheymustusematurenegotiationsinvolving anawareness of rules andskillsin usingtacticsto arriveat mutually beneficialagreements. Prof.EflanuelV.Soriao isafull-LitnePrcfessor 0t NM. His ateasol ififercsti ma agetnent eduuliofi coater 0 broadnnSeof subiecls in busi cssadmi istntionand publicnanagefient .

Bibliography Here is the suggestedreading list of Prof. Sorinno: Coffin, RoyceA., "T/reNegotiator," Bamesand Noble Books,1973. Fisher, Roger and Ury, William, "Getting To Yes"Penguin Books, 1988. March, Robert M."The " lapanese Negotiator SubtletyandStrategyBeVond Western Logic" Tokyo KodanshaInternational 1990. Schelling,Thomas C. "The Strategy of Conflict" Harvard University, 1960. "ConflictManagement a d Negotiatron," Philippine Values Digest, Vol. V No.4, 1993. Ury, William "Getting Past No" BusinessBooksLimited 1991.

APRrL-MAY1995 . THEAsrAN MANAGER

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Good,Chedp,and Fast (PickTwoOnlv) p r o d u c to r s e r v i c ec a n b e thoughtof as havingthreedimensions: qualirycost,anddelivery,or QCD. lroductqualityis the ,rtt bute dcsiredby buyersandgivestheproductits primaryvalueandusefulnessto them. ications,tolerances,dimensions, Specif durabilitv reliability,features, andvarietyareexamples ofqualityindicators. Cost,the seconddimension,refers to thecostof producinganddelivering theproductto customers; it hasan impactonanother cost:the costto thebuyersorthe"price"theypayforthegoods. Costaffectsthe marketabilitv of the product and the profitabilitv of the producerHigh priceis oftena consequenceof inefficiencies,low productivity, and high cost ofproducing the product. Delivery involves bringing the ftnishedgood. or service5lothecu'tomer at the right time, at thc right quantity oramount, at the fight place Delivery performance includes servicelevels,product availability, and order processingtime. Thesethreedimensions-QCD -are like the threelegso[ stoolon which the customer would sit. A problem in at least one of them meansl) there will be no product 2) therewill be no buyer One can-

not be sacrificedfor the sakeof the other two dimensions.Buverswant a three-dimensionalproduct-not just two, and surely not one.They want a good quality product at the dght cost,and at the right time and quantity.All are

F i g .1

Ouality

Cost

equallyimportant tobuyers.Agood qualitv reasonably-pricedproduct which is delivered Iate is for practical purposes uselessto the customerand is unsalable. A quality product which is promptly deliveretl but is outrageouslypricedbecause i l . m a n u f a c t u r i ncgl s t i s s i m i l a r l yo u t r a geous cannot be sold. The low competitive price and on-time delivery of anv merchandisecannotoffsetits lackofqual' ity and cannot changethe decisionof the customerto rejectit. To stay in business, therefore,itis important forany company to maintain the QCD balance and harmonv of its final output, be it a manufactured product or a service.

QOII interaetion The QCD missionofproduction managementisnot an easvtask.The threefacton areseldomat acceptableoroptimum levelssimultaneously.Thev are alwavs in a state of flux one factor will be much more problematicalor critical than the other trvo at any one time. The production manager is often subjectedto tremendouspressure from insideand outsidethe conpanv to conect and control just thc runawav element.UnfortuDelivery nateiy,he cannotsimply juggle the three and do sone tradeoffs,for they aremutually interdependenton eachothcr.Some

Tb .sta.yin businessit i,simpofinntfor on/'(:on.peny to nmintain the QCD lxtlance ond lmrmtnql'of it.$final output. 12

AfRrLM,\\ 1995. THr A5IANMANA|.,I.R

trade-offsor singlefactor adiustments may be tolerablein the shortterm;many aredangerousandmayworsentheproblemby causingunexpected, undesirable changesin the other two factors. Letus lookat someof the "expected" repercussions of trade-off,"band-aid" solutions: . A measureto solvea persistentquality problemmay be the inhoductionof new technologyand automationwhich mayincreaseprocessingcost.Productdelivery maybedelayedif installationtakes toolong. .The strong pressurefrom managementto cutcostsmayleadto theemploymentof lessskilled,cheaperlaborand/ or thesubstihrtionof inferior,cheaperraw materials, bothofwhichmaycausequality and delivery problemslater on. .The unbearablepressureto rush the delivery of promisedgoodsmay tempt the productionmanagerto hasten,shorten,if not omit,somecritical,usuallybottleneck,operationsor processes, resulting quality problems the in serious at end of the line. Sincethe cosi of the resulting scrapand defectsis spreadout over the goodones,manufacturing costlikewise increases. service Qualityandafter-sales problemsawaittheproductionmanager who tries to solvedelivery problemsby shipping old, unreliableinventory or stocK. Total Quallty Manogement TotalQualityManagement(TQM)defines "Quality" as "what thecustomers "whatthecustomer wants." saysit is" or (Big Thisquality Q) is very muchdifferent from the conventionalquality (small q) or genericquality.Genericquality simply refersto product quality-thedght feahrres,color, specifications,dimensions, reliabiliiy,and varieiy.Big Q Qualityincludesproduct quality, pricg and delivery Whatmostcustomerswant is not Fst ahigh qualityproduct,but onetheycould haveata low priceanddeliveredon time or earlier."Low price" couldmeanreasonableor competitive.In a mannerof saying,what the customerwants ls "good,cheap,and fast."Havinga high qualityproductdoesnot makeacompany a TQM practitioner,if the priceis high or uncompetitive and/ordeliveryisalways late. The QCD (quality, cost, delivery) 1995 THEASIANMANAGER. APRIL-MAY

model,with all its iterahonsasshownrn Fig. 2 (QCD Performance Mat x), is a useful frameworkto find out whereone companyis sihratedin the TQM process or journey.It will alsohelp the company benchmarkwith competitorswith referenceto the Quality (BigQ).

theyarepurchasing.Thetruth is thatthey are paying for the inefficienciesand excessive marginsof theseller

Good, aheap, and slow The third model or "Sold Ou(' phenomenonis comrnonlyseenin verypopular productsthat are high quality,low Goodr expenslve, and last priced, but nowhereto be found by the One of the mostcommonmanage- frustratedconsumerTheitem,or its most mentstylesis the "CostPlus" approach saleablemodel,is almostalwaysout of characterizedby a high quality product stock.The queueor reservationlist, or deliveredon timeor readilyavailable,but waiting line is eternallylong and may soldat a high price.Theconventionalwis- takemonthsto serve.Thesellerdoesnot dom hereis that if the customerwants mhd thelonglinesandthecustomerslost high quality and fast service,he should in thequeugsincethecashregisterkeeps be willing and ableto pay extraor a pre- on ringing.

OUALITY

COST

"COSTPLUS" "SNOB"

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FAST

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HIGH

LOW

SLOW

"COMMODITY"

LOW

FAST

"HOPELESS"

LOW

HIGH

SLOW

,'VVORLD CLASS"

HIGH

LOW

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Fig.2 Badr cheap and last The next type is the "Commodity" productthat has mediocrequality,low price, and is readily available.Consumers buy theseproductsbecausethey are Good r expenslve, and slow necessities usuallyprovidedby numerThe secondmodel for uncompeti- ous suppliers.The market is very pnce tivenessis the"Snob"approach:premium sensitive,but not particular about qualqualiiy, high price, and long delivery ity and service,which are basicallythe waiting period.The logic here,to both samefrom all suppliers.No onesupplier producersand targetcustomers,is that a standsout from therest.Theindustryin high quality product,usuallya luxury effectlures the customersinto lowering andexpectation. item,will havea "snobappeal"if theprice theirqualitystandards is exorbitantand waiting time long enoughto give an auraof being "hard to Bad, eqrenslver and slow get," "handcrafted"or "customized," Thequality nightmareor "Hopeless" "not availableto commonpeople."The caseoccurswhen the customergetsexreality howeveris that theprocesses may actlywhathedoesnot want:badquality be too wasteful and inefficientor the products,expensive,and late. The only profit marginstoo high; customersmay reasoncustomershavethe patienceand think that they are paying extra or wait- composureto gettheseis thatthereis only or thewholeining extra for extra value to the product onesupplier(monopoly) mium for them.A vastmajodtyof companiesare micromanagedthis way: "Chargethe customerfor everythinghe asksfor!"

"reengineering"effortsareheavilybiased dustry has the samemediocreperformandslow"compa- towardscyde time reductionand speedance."Bad,expensive, ing up deliveryor customerorderprocesv niesaresureto self destruct. ing time.Many "reengineering" initiatives put little emphasison improvementof Good, cheap, and fast TQM companiesconsistentlyshow productandservicequality (smallq),and "World Class"performance by coming focuson capital-intensive information out wilh high quality, low priced oroductsdelivered fast-the universalexpectationof any customer on any product or serviceanywhere. TQM has shown that "good,cheap,fast"is notonlypossible,doable,bui alsoa "must" for survival in very competitivemarkets.TQMcompanies do not compromiseany of the QCD element

technology(IT) solutionsthat may cllnve costsup. TQM combinesand coordinates all improvementeffortsinto onethat will reboundinto the samebottom line: customersatisfactionwith QCD. PrcfRe e T. Domiqo teachrsoperationsmanigenent, totalqualitVtno@gefienl,q antitatire atulysis,sen)ice delioery, and ntkageltlefil itlfomlatiorl systems.

Coueeq SERVERS SpeNTsn DrsreNcn Bersr.EgN ToDAY'sRrerturs ANo Toruonno\r's OppontuNITIES.

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for theanotherAll effortsand systemsare focusedinto delivering the QCD expectations of customthe time at the same time. ers all TQM cor4paniesdo not advertise, as one restaurantdid,"GOOD, CHEAP,AND FAST,"andthenfollows up with a disclairner"Pick Two Only." Presenteffortsto improveqrstomersatisfaction and serviceare oftenmyopic and tend to focuson one QCD elementor "Pick one only" approach.Quality improvement programsand projectsoften focus on quality (small q) or product/processqualit, with little or no effort to cut costs (wastes) and cycle time "Rightsizing," simultaneously. "downsizing"and othercost-cutting initiatives fail in that they focussolelyon cost,specificallylabor costs,while sacrificingquality,delivery andemployeemoralein the p r oce s sM . ea n w h i le , c ur r en t 14

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BY PROFESSoR QUINTIN G. TAN

Entrepreneurs, Corporate LikeBusiness Entrepreneurs, AreMade ho are the entrepreneurs?muchexperiential learningin criminal when resourcesare Whyarethey admired?Can backyards,garages,kitchens wasted, loans are not paid, Three onlya fewbecomeentrepre- andplaces theyareactivelyinpeople are laid off, and their neurs?Are theyborn or aretheymade? volvedin transformingideas families dislocated.Business times Canenhepreneurship be taught? into products.Many large and managementhave to be as many Peoplecommonlybelievethat entre- corporationstodaycantrace learned well. Long-estabpreneursare non-conformists, opportu- their beginningsto a solitary lished and large corporations utomen nity-seekers, risk-takers, andanyonewho product,fashionedby an enhave expedencedsetbacksin startstheir own businessventures.An- trepreneutto satisfya specific than men recent times and have reothercommonbeliefisentrepreneurs are need. to down-sizing, restart neu, sorted born,not made. At the sametimewe must trenching,and closing plants Entrepreneurs are admiredworld- rememberthat entrepreneurs uentures. and operations. Yet, all of wide because thevisibleonesarehighly developed products,notbusithem know business very successful. They are recognizedfor the nessenterprises. Entreprewell. What fheylack is a sense new products,new processes and ways neurshipis not business and entrepre- of creativity to revive the business-enof doing things, new businesssystems, neursare not necessarily businessmen. trepreneurship.Corporateentrepreneurs, and new businessventuresthey intro- Entrepreneurs aredistinguished for their or Tntrapreneurs, dre whdt corpordtions duce.Theyarehonoredfor their contd- creative andinnovativeskills,butmayre- now aspire to have within their organibutionto industryand their concernfor quire management skills. zations. society.Moreovet they are envied for Entrepreneurial skills and attitudes Developing enhepreneurialspiritand their independence, not havingto work canbe learned.Still,whilebusinessand a senseof personalachievement can be for a "boss"otherthanthemselves. management skills arenow standardin attributed to three essentialand interreEntrepreneurs emergein all societies. business schools, thesesameschoolsin- l a t e df a c t o r . :l ) E n v i r o n m e n t , 2E ) coTheycomefrom differentwalksof life. appropriatelyofferentrepreneurship as nomic Relationships,and 3) Experience. Nowadays,youngerpeopleare becom- a courseon "How toStarta Business VenThesefactorsmay provideinsightson ing successfulbusinessentrepreneurs, fure." why Asiais the fastestgrowingregionin and itis alsosaidthatthreâ&#x201A;Źtimesasmany Peopleshouldnot be lured to going the world, why Japan is now the third women thanmen startnew ventures. intobusiness unprepared. Business is not r i c h e s tc o u n t r y i n t e r m s o f C N P p e r But notionsabout them continueto for everybody-not for thosewho merely capita,and why some businesscorporaabound,suchas "oneonly learnsentre- wanttogointoit, orthosewhoknowhow tions continue to grow "Entrepreneurs" preneurship throughtheschoolof hard- to manufacture a usefulproduct,orthose are the answen to thesequestions. knocks,"and that the surestway of to who mayinherita business. Weknow that be an entrepreneur is to havean MBA. worldwide,eightout of everyten new f,nvironment Ttis truethat entrepreneurs acquire businesses, fail. Business failurescanbe An environmentconduciveto devel16

APRIL-MAY 1995. THEASIANMANAGER

oping entrepreneursis characterizedby: a) freedom topursue and transfer ideas; b) presenceof an open market where individuals can expresstheir ideas in an infinite variety of products; c) minimum restrictions from authorities that allow the pursuit of an interest,with available support from the community; and d) access to materials and technologiesfor product development. One such environment is the informal sector,or the underground economy, which has often been referred to as the "Seedbed of Entrepreneurship."Here legal economic activities are unreported and unregistered,and thereforeuntaxed. The informal sector's climate permits innovation and tolerates mistakes.Variety is a norm, and standards do not deter creativity. Many well-known entrepreneursdeveloped their talents in the informal sector. Some startedas livelihood operations and progressedinto small bu;inesses, then blossomedinto largecorporationssome we know today. The informal sector is growing in developed countries and is actually the largest,private, market-orientedsectorin Asian economies in terms of labor employment and output. The informal sector may constitute as much as 50% of Asia'sGDP,and over 50%of its employment. Many of Pakistan'smajor exports are produced in the informal sector.It is estimated that 54% of the labor force in Indonesia.isemployed in the informal sector.Iapan's underground economy is estimatedat9% of GNP,and is growing rapidly. This sector contributed at least 42Voto the PhilippinesGDP for 1993. Operations in the underground economy are mostly family- or communitybased.A recentstudy indicated that half of all Filipino households have self-operated businesses.Every home-based product may differ even in somerespects from those produced by other households, and this uniquenessmay appealto setsof loyal customers. With successthese small operations grow. The entrepreneurshire more people to run their firms. And sooneror later, they may lose control of the businessto the professionals.Growth is oftentimes accompaniedby order which reduces flexibility and invites bureaucracy.Many corporationsthat hit this stageof growth o Apnrr-May1995 THEASIANMANAGER

lose not only the entrepreneut but also their enhepreneurialspirit. By design,the environment of many corporations restrict creativity and discourageemployee initiatives, by rigid rules and policiesthat govern individual actions.Corporatecultures tend to enforce uniformitv in patternsof thoughtand behavior,raiherthan encourageindividual interests. Some organizationsthat have managed to nourish among their employees the entrepreneurial spirit, or "intrapreneurship," include Motorola, Texas Instruments, Matsushita, and American Expresshave features similar to the underground economy.Empowering employees,delayering management levels in corporations, and fostering unmanagedteams duplicatethe situation e n t r e p r e n e u r si n t h e u n d e r g r o u n d economy find themselvesin-no bosses or supervisors.Cooperationand unity are achievedby attemptsto simulatethe family and the community where operations arereduced into smallerunits. Workplans and targetsare decided at the lowest levels. Deonomie relationships Many successfulentrepreneurs started with limited experienceand resources to develop the products or projects for which they arenow recognizedfor. Aside from their personal efforts, the support given them, particularly processtechnology, tools and equipment, m?terial inputs, and financial support, has allowed entrepreneurs to dedicate substantive time to pursuing their ideas.Not unusual is the backing a "sponsor" or "guarantor" may give in opening doors or providing referrals for clearing thg way. This role hasbeenplayed by spouses,relatives,superiors, or friends, ot in the caseof immigrants, clan leaders.The ability to solicit help from others seemsto be a quality all entrepreneurshave learned to acquire. Networking is important to entrepreneurs, who learn much from each network participant. Entrepreneursalso learn to develop skills in listening,respect for others, and appreciation for help given.Most importantly, they learn never to betray others' trust. More than a competitive spirit, entrepreneurshipimbibes a senseof cooperation. One relationship that requires close

cooperationis when one'stotal production outputis committedto anothercompanyfor marketing.Themarketingfirm, on the otherhand,is entirelydependent on this supplierfor its sales.Thisinterdependencyis the underlyingprinciple in subcontracting systems. This interdependentrelationshipis now widely practicedin Japan,where 99.5%of all the firms aresmalland medium-sized.A largefirm, on theaverage, mayhaveasmanyas13,000 primary,secondary,and tertiary independentlyownedsubcontracting firms.Potentially, thatis 13,000 entrepreneurs with thespecializationandflexibilityto innovateand developnew products/ new processes, and new combinations of materialsthat translateinto new featuresor product models.Mostof thesubcontractors in Japan arein production,and theydevelop high specialization in their fields.This conceptof collaborativeeffort hasbeen

Enheprcneurt Imrn to deaelop slcills in listening, reqteetfor otherc, and apprwiation

for getting help. adapted in many different ways. In the United States,they call this the "confederation of small firms," a practice gaining wider acceptance. A broader concept of subcontracting is practiced by Benetton of Italy, which subcontractsits production, finance,and marketing functions to independent producers,financiers,and marketing agents. This collaborative and interdependent schemehas been adapted fuither by ASEA Brown Boveri, which views as "subcontracting" its entire businessto its 1,300 each of independently-owned companies.Eachcompany is involved in production, finance,and marketing as an ASEA Brown Boveri company,yet is part of the whole corporation. Key to the sta1n

bility of relationships is the trustworthinessof eachparty.

comes from knowing that their product is acceptableand serves its purpose through market testing. The enterprise Dntrepreneurial experience usually starts when orders for the prodExperienceis an acquired learning by uct are receivedand growth comeswhen applying a specificknowledge to practice. more people ask about it. Often, product One may never becomean entrepreneur acceptance,more than profits, is the juswithout hands-on experience. Substan- tification for growth. tive learning is increased,and self-esteem But growth in market demand may enhanced,when new insightsand discov- necessitategetting outside assistance, eriesare gained by selfJearning.This ex- and this requires organizational skills. The entrepreneursmust perience can be acquired in any work area: in factories,in homes,or in the field, Iearnhow to hire, train, and and becomesentrepreneurialwhen ideas r e t a i n w o r k e r s , m o s t o f whom are working for the are transformed in an innovative way. Many contemporarysuccessfulentre- first time. A senseof repreneurs developed an idea into a prodsponsibility to provide uct that somebodyneeded.The high qualtheir workers a stableinity characteristicsand specificationsof the cometo supporttheir famiproduct are a result of knowing exactly lies puts pressureon entrethe consumers and their needs,and propreneurs to keep their opducing accordingly. erations viable. For many The innovative ideasof entrepreneurs entrepreneurs,.theirsocial may have stemmed from a problem, an concernis awakened. interest, a challenge, or an opportunity they encountered.Their strongestmoti3M and Fuji Xerox vation is to addressa particular need of a Corporations need specific user or beneficiary, oftentimes intrepreneurs to propel themselves. their growth. Fortunately, Through actual experience,the entre- there are now models of preneur develops processlearning skills successes.Successfulones of observation, analysis, interpretation, have developedthe enviand association.Active learning is a co- ronment, enhancedrelationshipsinteroperative and humbling act. Simplicity, nally,aswell asnetworked externallyparopenness,and honesty with themselves ticularly with customers,and encouraged are traits that distinguish successfulen- their employees to gain entiepreneurial treprenegrsfrom others. experience within the corporation. The Other entrepreneurial skills, traits, Minnesota Mining and Manufacturing (3M) Corporation of St. Paul in the USA and attitudes are acquired in protot)?ing, a seriesof product experiments until a and Fuji Xerox of Japan are notable exsatisfactory result is reached. Each suc- amples. ceedingtrial is an improvement over the At 3M, intrapreneurship is encourprevious one;eachimprovement is an inaged among their employees.To cite a cremental success,and a seriesof incre- number of policies:1.)75Vorule - where mental successes develops confidencein employeesmay use 75Voof their work the individual. The confidenceexudedby week in pursuit of interestsoutsidetheir those who have successfullymastereda primary assignment;2)Internal selling processor produced a product has often anyonewith a product idea can carry it been interpreted as courage or as a riskaround the 42 divisions and seek suptaking trait. port 3) Genesis grants - gives up to A new businessventure can provide $50,000to carry the project beyond the entrepreneurial opportunities. The limidea stage;4) Sponsor- A senior official ited experienceand resourcesof business is assigned to facilitate accessto repeople compel them to be resourceful, sources;5) Action team - the promoter may recruit members from technical, creative,and enterprising.The sayingthat "Necessityis the mother manufacturing, or salesdivisions to help of invention" likewise applies to entrepreneurs. designand developthe product; 6) manSelf-satisfaction for entrepreneurs agementladder - when salesof products

reaches$5 M, the promoter becomes product managet at $20 M, S(he)becomesdepartmentmanagersand at $75 M becomesdivision managers.Product champions have a chanceto manage their own product as if it were their own business.7) 25% rule stressesthat 25Va of salesmust come from products introduced within the last five years. At Fuji Xerox, employeeshave a chanceof becoming President of their own companies. An employee with an acceptableproduct ideais freed from his/her responsibilities and is supPorted to develop the product. Once developed, the employee is trained in business and management,then given equity.S(he)then "President" becomes of the company to produce and market the product. Chinese,Vietnamese, and Korean immigrants often find all thesethreefactors,-environment,economicrelationships, and experience-present in communities established by their countrymen in foreign countries. The growing number of Chineseshops,Vietnameserestaurants,and Korean supermarketsin the US attest to the development of the entrepreneurial processamong theseimmigrants. Entrepreneurscanbe made.Entrepreneurial knowledge and skills can now be conceptualized,simulated in an active processof learning, and taught in a formal classroom.Thisdoes not exempt, however, would-be entrepreneurs from actuallyexperiencingthe thrill of running their own business.This cannot be experienced in a classroom. Honot trustworthiness, cooperativeness,and willingness to share what one haswith othersarethe traits and attitudes that entrepreneurswill ultimately learn to becomesuccessful.

Innouatiue idms stem

{rcm a prcblem" an intercst" a ehallenge, or an

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entnepneneura eneounted.

Prof. QuintinG. TanholdstheCanadian ProfessorialChairof BusinessManagement.He is currently inaolaedin thedeaelopment of a courseon entrepreneurship. APRIL.MAY1995. THTAsIAN MANAGER

TheAsianInstihrteof Management is promotingthe developmentof entrepreneurs and intrapreneursamongour graduatestudents.Effortsdirectedtowardsthisgoalinvolve AIM collaboration with thebusiness sectorfor studentto acquirehands-onexperience throughtheintegratedapplications (internshipandapprenticeproject(lAP),actionconsultancy ship)walkabout,management research report(MRR)ventures, andfield exercises. Thenew designinvolves30%of thetwo(MBM)programto be yearMasterin Business Management spentin acquiringexperiential leaming.Wewould appreciyou may wish to sharewith us to achieve ateany assistance this soal. thir r.t.uuy attemptsto identify who amongthe AIM alumni are now ENTREPRENEURS or cornorateINTRA-

J'Ef.NlUBtTlp:ralunniluvr gff Jhjntjnronrlon;lhr/

create areinnovato$who discovernewproductsor services, productivandbringenterprise demandor findnewmarkets because iry salesandprofitsto higherlevelsof performance Theonly strategies,schemes, productsor services. of ingenious differenceis that the entrepreneurs run their own business innovatewithin thecorporatestructure. whileintrapreneurs Tohelpbuild our informationbaseon AIM entrepreneurs maywe requestyou to answerthefollowandinftapreneurs, ing questions?

(Service? Whatis thenatureof your business? Manufacturing?frading? Financing?) (Endconsumer? Whois yourimmediate customer? Dstributor?IndustrialProducer?) Describe brieflytheinnovationsor creativeinteruentions whichyouhaveintroducedto themarketor to your organizationthat raisedenterpriseperformancelevelssignificantly?

Did the innovationor creativeinterventioninvolve(checkthe appropriate boxes) innovationin productdesignor servicefeature? creativechangein productionsystems? creationoI demandor findingnew markets? creativechangein marketingsystem? discoveryor interventionof newproductsor a newservicewhichwasnot yetin themarket? creativechangein financialandconholsystems? andadministrative creativechangein organizational systems? management? innovationin loSistics or intrepre5. Whatmotivatedyouto becomeanentrepreneur neur?

Name Company AIM Class/Batch Positionin Company Years of work experience

No 1. Are you an entrepreneur? Intrapreneur? Both? If your answeris no to all of theabove,pleasedo not con tinuefilling up thequestionnaire. 2. Whendid you setup your entrepreneurial enterprise? inhapreneurin8? Or,whendid you first experience

activity 3. Whatindustryis your enterprise or intrapreneurial in?

asan entrepreneur or How did you gaugeyour success intrapreneur? Successful? Verysuccessful? Somewhat successful? Stilltryingto besuccessful? By whatc teriadid you rateyour self?(Citespecificperformanceindicators.)

7. Will you be willing to participatein AIM's entrepreneurprograrnasan advisor,mentoror coach shipdevelopment who areinterested in becomtoAIM studentsandgraduates ing entrepreneun or intrapreneurs? Yes No Are you interestedin documentingyour enhepreneuringor pro8ram? intrapreneuring throughour cdsewriting

Pleasef ax your aflslt)ersto: Prcf . Quintin G. Tan,Fax No. (632)817-9240. THEASIANMANAGER. APRIL-MAY1995

't9

Bv Prorusson EnnorB. Penrz

AreStock Prices Random orNot? Editor's note: In the last issueof THE and the random walk hlpothesis is emrAsrANMANAGER P r o f . G e o r g e T a n nently testable,asthey say. This article tests wrote an articleon TechnicalAnalvsis. that proposition. One of the underlyingassumptionsin TechnicalAnalysis is that stock prices The dala reflectall factors in the market-ecoWe used daily price data of SanMiguel n o m i c n e w s , f u n d a m e n t a lo e r f o r m "A," Corporation a common stock,from the ance of the companv, market makers Philippine Stock Exchange from July 1,1994 a n d t r a d i n gv o l u m e ,b u y e re m o t i o n the so-calledEfficientMarketstheory. to November29,1994,covering106daysof The Elliot Wave principlesstates nev- hading. (seeTable1) erthelessthat despitethis assumptton. stock prices,over time, tend to follow The model repeatingwave-likepatterns,and that The test which emanatesfrom the ranone can predictwith reasonableaccudom walk hypothesis: racv subsequentmovements of these pattern$ In this article Prof. Errol B. Z,=2,,+a, Perezusesstatisticalteststo provethis when Zr = price at time t theory. and the debate rages on. Z ,= price at one period before time t ar = an error term which is random, and therefore not consisiently predictable. Under this model, the price one period tockp cesappearto be predictable from now is simply the lastobservedprice. asedon historical price seriesanalyThe error term is random, so its expected sis,andspecificrule-basedexhopol- value is zero.The last observedprice, thereation. In computingretums,howevet fore, is the best forecast price for the next pricechangesplus any cashdividends period. during aspecificperiodarenecessary and The rationalefor all this is anchoredon sufficientrequiremenls.The randomwalk a bigger hypothesis, called Efficient Markets ftypotftesis holdsthat pricechangesarees- Hypothesis.News relative to the stock are sentiallyseriallyindependentof each constantly monitored, so that the price very other,whetherimmediateor lagged. quickly reflects all information, except inTrendsbasicallydo not becomeconsist- sider information, for an indeterminate entlyexploitablebecause pricechanges are amount of time which varies from market undpredictable in anyconsistent fashion, to market.Settingasideinsiderinformation evenif the pricesdo appearpredictable. for the lime being, the changein the price Academicscallthisanempiricalquestion, between the current and previous period is

really the random error term, i.e., ( 2 , - 2 , , )= a , The stock price change seriesis therefore really nothing but a series of inde pendentrandom events. lt alsobecomes obvious that the stock price seriesis a series of first differences.By inference,therefore, the Efficient Markets Hypothesrs posesserious misgivings relative to the usefulness,on a consistentbasis,of technical analysis. lDala analysis We first examine the behavior of the data without doing any first differencing as noted above by the random walk model. Figure I representsthe behavior of San Miguel Corporation"A" stock,basedon closing prices. Pricesare plotted across time in terms of number of cumulative observations.Actual pricesvary significantly from the computedavercgeof 97.427359, with the following statistics in Table2. Figurc 1 appean to say that due to volatility (alsoevident in Table2,) the actual period-tlpâ&#x201A;Źriod averagesarenon-stationary If thepriceaverageofSanMiguel "A" is nonstationary a meaningful test of the random walk hypothesiswould require a differencingoperation.Therationale is that with a price seriesplacedon a first differenced basis, a direct test of the independence of the error terms may be done. The objective is to drive the period to period averaBeto close to zero, so that 1995. THEASIANMANAGER APRIL-MAY

if first differencingdoesnot resultin a sta- asTable4. Figure3 showsthe autocor- sicallyuncorrelated, thenwemayhypothtionaryaverage, thenasecond differencing relationandpartialautocorrelation func- esizethat pricechanges,and therefore usually works. Of coursethe lossof de- tions basedon Table4. Thereareno pat- returns,are not amenableto consistent greesof freedomshouldalsobea concem. ternswhich are significant,i.e. falling e\tropoldtion basedon patterns.Thisis To confirm further the presenceof a outsideof theboundaries of5% with the not an actof pattemdrawing,but oneof nonstationaryaveragefor SanMiguel Box-Pierce statisticlow and not statisti- correlations.Table6 presentsthe corre"A,"theautocorrelation and partialauto- callysignificant. lationbetweenadjacent differenced data. correlationfunctionsareexamined.Both Figure4 showsthe first differenced TheconelationbetweenSMCADvs, functionsshouldshowno obviouspattems plot of the SanMiguel CorporationA. SMCAD-1is verylow andthet-statistics suchasa slowdecay tozeroorothersharp Theaverageis closeto zerowith thefirct is well belowthecut-offof 1.64fora 957a pattemsif the price seriesare lagged. If differences fluctuating aroundit. Thisis confidence level. thereare obviouspatternsthen the data indicativeof independence in the data On the other hand, if we compute would bedifferencedandagainbothfunc- series.Table5 presentssummarystatis- theperiodreturnson thestockasgiven tionsexamined.Theresultsareshownin ticsof thefirst. by Table7 and using the return forFigure2. Additionally Figure2 indicatesa lf thefirstdifferences areseenfrom mula SMCAP= SMCAP- SMCAP,, Box-Pierce statisticwhich is far abovethe the perspective of returnson the stock, SMCAP,.r chi-squarecut-offof I 24.0at the95%level, andseeingthatthefirstdifferences areba- and their conelations,we haveTable8. which meansthat thenonstationaryaverwhich ageproducesan autocorrelation permeates the entiredataset. Theredoes The Effie.ient Markets llypothesis poses appearto be a needto performa first difference(atleast)on theprices.Otherwise, serious misgiuings relqtiue to the usefulness, we may casuallyassumethat rehlrnsas on a eo;nsistent hasis, t$ teehnieal analysis. wellaspricesmaysimplybeexhapolated on thebasisof somepattem. But to be rigorousaboutour point, an modelof order1 is fitted autoregressive tgu.c I to Table1,givenby Table3. Earlier,we saidthatZ,= 2,.,+ a, andthat(2,-2,,)= a,. An equivalentnotationis (1-B)Z, = a, 0 1 l l l il0ll The coefficient of B is the coefficient modelAR (1), 00.1_ of theautoregressive 00i_ sothat 0081 (1-.95433028) = Z, a,. 0ll0 The stationaritycondition re)!\1\\(A I -rl0& quiresthe.AR(1 ) coefficientto beless r 0l9 1 0 l r 0 l l 00l.l than1.0at a statistically significant Iurld oJohsenrr,lns lt)6 l l r r l - i .0t9.l level. I llr.'r 0rlxl t . t 0 l i _ 0 t.l:l Totest,we computethet-statistic: lr 00$ :...-".. t = .9543302-1 , 1o -0016 - 0 i i 8 0.0298746 : .:::::' t8 r0ll where the denominatoris the l 9 u0 t l S t a n d a r dE r r o r o f t h e A R ( 1 ) l0 0.I : : ; 010coeffficient in Table3. ll LrlL lll ll 0 0ll'j -1 = .5287167 . t .lj -|011 l{ .0LliS This valueis Iessthan the cutl5 tlf 0.Ii off t valueof 1.64at 95%,andthereforedoesnot indicatesignificance. Sincethe AR (1) coefficientis not significantlydifferentfrom 1.0,the price seriesis not stationaryin the averaSe. Uslng dlffereneed data If we take Z, - Z,-rwe obtaina newsetof data,whichis presented THEASIANMANACER. APRIL-MAY1995

Again,thecorrelationbetweenadjacent rctumson SanMiguel A is very low, and the t-statisticis not significantat the 95% level. Thisis afirst testof thepropositionthat if stockpricesarerelatedto eachother,then the future returnsmay be consistently forecastable. Or arewe reallyinterestedin thepricechanges?But if pricechalgesare essentiallyindependent,arcnot thefuture rehrmsalso independent?Doesit male senseto study pattems,or doesa simple, last-observed-price-equals-best-f orecastprice give beftervaluevis a vis stockIe tum peformance? In future articleswe shall continuethe inquiry Prof.Enol B. Perczis a tnenberof corefacultyol the Masterin Managemenl Prcglam.

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. THEASIANMANAGER APRIL-MAY,1995

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o u n d e r s t a n dt h e A s i a n sb e t t e r e , speI I c i a l l y t h o s ey o u d e a l with in business, you haveto know the principlestheylive by," saysthe authorof this bookemphatically. Why?Becausethese principlesare foundedonAsianreligion,beliefs,and traditions,and are almostalwaysreflectedin Asianbusiness practice. The Asiansin TheAsian Mind Cameare the Chinese, and Koreans.AlJapanese, thoughthisbookis written for Westeme$, authorChin-Ning Chu's ideasalsoapplyto Indonesianbusiness, big and small.The problemsof Indonesianswith Japanese partnen stemfrom their insufficient knowledgeof Japanese businesspractices, whichare manifestationsof Japanese life principles.Thesameis truewith the Chineseand Koreans,whose haditionsoftencause business complications. Whiletheyare "Asians,"theystill experience cultureshockin their dealings with Indonesians. To bridge this cultural gap,onemust know the hist o r i e s o f t h e s ec o u n t r i e s . Chin-NingChu describes the teachingsof Confuciusand Sun Tzu, ind their application to Chineselife from the emperorsto ChairmanMao r,ll

tn Dpno

hro<ant

Thebookalso profilesJapan from the ShogunTokugawaup to PostWorldWarII. Thecleanliness ofJapanese factoriesmanifeststheShintoreligious teachingof physical well-being,which comesfrom Confucius andBuddhaZen. One factorthat promotes betterbusinesstiesis amaLa bondbasedon trust and affection. Although prospective partners may offer lower prices,theJapanese aredisinclinedto choosepartnersthey do not know. SWA got acceptedby theEditor-in<hiefof 30

Nikei Shimbun in Tokvo throughthehelpof a journilist of the paper in Jakarta. Doorsto Kyodoand Nippon HoshoKyoku (NHK) were openedwider throughtheintercession of JETRO."l was ableto establish a relationship with aJapanese buyerthrough thehelpof a Japanese professorwho wasassigned in Bandung,"saidRuniPalar,whose tradename,RunaBali,is now a recognized namein theJapanesesilvercraftindustry.

knees."It was an incredible feat.Tothesamurais, theReaganvisitmeantthat: 1.Japanhadbecomea nationto reckonwith. 2. They "thought"the tuturethroughRonaldReagan. His successor, GeorgeBush, was expectedto adopt Reagan'spolicyto put a premium onAmerican-Japanese haderelations. 3.USpoliticians in thecowr oftheircareen, canonlydobusinesswith Japan-Jike Ronald

plainedthat two ceramicvases he receivedwere broken,and demanded compensation."l packedthem myself.I checked them over and over,"the businessmaninsisted.He neverthelessfaxed that he would immediately transfer$100to his buyer's Tokyo bank. "What happenednext sulprisedme," the businessmansaid. The buyer apologized ; it was a test of the Indonesianpartner's loyalty. Korean culture, meanwhile, blends ancientChina's influence,Japaneseenergy,and nationalisticsentiment in the people's search for identity. Korea occupies the second highest slot after Japan in Asia's economicgrid, even if Koreaonly beganindustrializing ten years after Taiwan and fifteen years after its maior competitot Japan.Although Korea is faced with problems, particularly its conflict with North Korea, its economy has remainedvigorous. Koreagotthe bestfrom the traditions and culture of China and Japan.The Koreans are very much like the Chinese,who are more open, and unlike theJapanese, who are reservedand alwayswary On theother hand due to continuous foreign influence in Korea cenfuries,the Koreans Reagar-aftertheyreiire. are generally short-tempered If you read the book Tle,la and prone to anger, though . panThnfCanSrrqMr, you will they do calm down easily. find Chin-Ning'sarticleenti- They are jealous, obstinate, tled "Morita and Ishiwara." conversant,and enjoy humor Accordingto Chin,thebookThesetraits make the Koreans which has causeda stir in the "lrish of Asia." America-is really intended This book, presented in for Japanese businessmen. simple language,is a must Akio Morita's co-authorship for people intending to do of thisbookwasremoved,per- businesswith the Chinese, haps to appease Sonyin the Japanese,Koreans,and Tailandof UncleSam. wanese

e Asian

The Shogun Tokugawa samurais lost their hold when Emperor Meiji ascendedthe throne.Now, the samuraisare back as workers, managers, and execrrtives.Thesesamurais have made Japan one of the most powerful nations today, and their businessstrategies and techniqueshave become institutions. One example of samurai acumen was to get former US President Ronald Reagan to Keepingpromises is kevto speak before Tokyo business- a successful relationship with men. The ex-presidentof the Japanese. An Indonesian cecountry that defeatedJapanin ramicsexporterwas in a fix beWorld War II cameon "bended causehisJapanese buyercom-

Hansts.Supiya is tfu Seniat Manag|tg tbr of SWA Smhadn Mngnzifit, Itldo

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By SrNouuKuullan

GoodGovernance (;or'crn nce enconrpasses reverybodyis talkingabout govern ance.All of a suddena single lation. between government, civil5ocithemedominatesall conferences, ett the privateprcfit seekingsectotthe seminarsand policy dialogues.The lat- family,and theindividualcitizen,"insoestin Developmentappearsto be Gov- farastheserelationsbearon governinga ernance. society." Governance is thevalue-neutral term whichexpresses manyabidingconcerns of management experts,economists and There are no politicalscientists. In thepastit hasgone underthenameofmanagement ofdeveldemoeraeies opment,institutionalarrangements, role which are not of the stateand,occasionally, honest-togoodness government,especiallyin the market eeonomies, way it exercises powerandauthodty. The Eightiessaw many failedstructural adjustmentprogramsinitiatedby But there are multilateralfunding agencies,general seueral market declinesi4 GDP,andfallingstandards in thequalityof life. It thereforebecamenececonomies uhieh essaryto find a vocabularyto explain are not thesehappeningswithout ascribing blameto corruption,mismanagement, demoeraeies. andthepitfallsof authoritarianism. Good governance-orlackof it-seemedto say it all. (lovernance in<.ludes lhe eleRecently, the Third ADB Conference Development on Economics in Manila rnents of dr:rnocracr, good goropenedwith a think pieceon thecurent e r n m e n t , a n d d c r e l o p m e n t . A bestseller-Coaerucrce-by thedovenof great deal of empirical researchhasgone Development Economists, PaulStreeten. into establishinga link betweenforms of Giventhe varietyof prismsfrom which governments,economicgrowth and detheissueis presentlybeingaddressed, it velopment.The findings of thesediverse is hardlysurprisingthat the paperpre- researchstudiesareinconclusivein estabsentedat the Conference lackeda sharp lishing any such link. The only incontrofocus. However, it managed to cdpture in vertible fact which emergesis that there its broadsweepthe severalintenelated areqq democracieswhich arep! market strandsof the currentdiscoursearound economies,But there arc severalmarket it. Someof thesâ&#x201A;Źare: economieswhich are lqldemocracie.. 32

Notable amongst these are "the East Asianmiracles"whichowe theirachievements to uncompromisingly authoritarian regimes. On the other hand, Costa Rica,Malaysia,and Venezuelahave performed well economicallywhile retaining their democratic forms of government. Howevet the researchfindings do note that human development,with rmproved health and education,as well as higher incomes,leads "sooneror later to an irresistiblecall for freedom,"asis clear from the experienceof much of Eastern Europe today. Governanre involves strong arrd oflen expanded slale inlerrerrliorr. Stateminimalismi5 categorically rejected;the role of the stateis redefined to includeactionto ensurethatmarkets function efficiently and effectively. Developing country governments have overe\tendedthemselve: by intervening in areaswhich are best left to the market. For example,in India, stateowned enterprises made bread and steel,ran luxury hotelsand airlines,and exercisedcontrol on all industrial activity until the process ofeconomicreform startedin 1991.However,after freeing thesesectorsof controls, itdoes notnecessarilyfollow that governments should retreat from functions which rest squarelyin their domain. On the contrary,redirecting,redefining,and reorientingthe functionsof govemments is high on the govemanceagenda.This includes intervention not only in the socialsectorsbut alsoin areassuchascapital marketsbecausein many casesthe en-

APRII--MAY 1995. THEASIANMANAGER

vironment in which they function are to essencharacterized by lackof access tial informationregardingcreditquality and risk profileof the corporateand filegalsafenancialsectorandinadequate guardsto ensureprotectionto investors. Thailand In tune with this perspective, their and lndonesiahavestrengthened andHong regulatoryandratingagencies Kong hasreformedits regulatorystructures. (,lovernanceincludes producing, providing' and finarrcing goods and services. The conventionalwisdomis thatthestatemustregulatethe supplyof public"bads"andensuretheprovisionofpublicgoods.lnaddition,thestatemustprovideinfrastructure and investin human resourcedevelopmentin a way that efficiencyand productivityareoptimized.In performing eachof thesefunctionsthepublicand privatesectormustwork togetherJapan of producandKoreaaregoodexamples cooperativeandefficientpublic-private tion. Good governancâ&#x201A;Ź resason ahe principles of predi<'tabilitv and the rule of lau; accounlabilily; openness and transparenr:y. The processes whichembodytheseprinciples dredecentralization and its variant:,i.e delegation, devolution; deconcentration, its variants,i.e. liberalizationand stabilizationand ad,ustment;and deregulathatlibtion.It is now widelyrecognized adjustment eralizationmacroeconomic through and participatorydevelopment a processof decentralization areclosely linked.The intensificationof the strucsince turalreform effortin thePhilippines 1986is payingdividendsin the form of growth.Atthe sametime,this accelerated reformisbackedby a significantpushto-

wardsdecenhalization through theenactmentof theLocalGovernment Code1991. PolandandRomaniaareotherexamples wheresimilareffortsareunderwayafter decadesof tight centralizedcontrols. However,a cautionarynoteis sounded on oversimplification of theseprinciples

Theattempt bv multilateral

institutions such as the IMF andthe WorklBank to espouse the eauseot good goaernance E Seen ov

goaernments

as an attempl to impose political eonditions,

Bankto espouse the causeof goodgovernance is seenby counhy/governments asan attemptto imposepoliticalconditionalities. The hiddenagenda,if any,to straitjacket allcounhies andculhrres intoa sinmodelis to be gleeconomic-cum-political viewedwith justifiablesuspicionin a unipolarworld over.But to jettisonthe concepton accountof its politicalovertonesis like throwing awaythebabywith thebathwater. The basicpremiseis to acceptthat thereneed not be a single monolithic modelof good governance. The design of institutionsandstylesof government are countryspecificandculhrrespecific. But, a stronglegalframework,efficient aswell andeffectiveregulatoryagencies, astransparent decisionmakingprocesses are the bulwarksof soundpublic mana8ementwhetherin Asia,Africaor in EasternEurope.Reformsin processes and proceduresof governmentare required to createor strengthencapacity in publicagencies. Suchreformsneedto coverareassuchas public expenditure reviewsto improve public investment improgrammingand budgetmaking, provementsin management of governmentownedand controlled companies andcivil servicereformsto includecostand HRD to encontainmentmeasures hancethe skills and productivityof the implementingarm of govemmentprograms.Indeed,thelogicalcorollaryto allowing marketsto work is to havegovemmentsthatwork.

into what ProfessorStreetenin another "premahrrecry:context,characlerizedas tallization of fl awed orthodoxies." The nohon of good govemdnceevokes strong reactions.In particular, developing country govemmentsview this as an intrusion on their sovereignty.The inshtutional baseand practiceof governance, especiallyin Asia, lends itself to a variety in Indiauith 20 Si dh Kh llaris fromthcci)il seroice of approachesleading to the same goal, learsoltn|orkig expelience in thearcas af HRD,trade, . Shehastnntd h Dettelopme t Econoanddevelopment namely,improvementof the quality of life miesalBoston U ircrsilyandh PublicAdmi islntion and standard of living of the people. ol llt knnd! School ofCouernmenl , HanardUnfi)erTherefore,the attempt by multilateral insit!. At Fres t sheisa VisitingFellowal lheNM-Policy stitutions such as the IMF and the World

..LITTLE DE. ELSE Is REQUIRED To CARRYA STATE TOTHEHIGHEST BUTPEACE. FROMTHELO\TEST BARBARIANISM. GREE OFOPULENCE ADMINISTRATION OFIUSTICE...'' EASY TAXES, ANDA TOLERABLE ttt.t'sArlau Snith: Art lnquiry irrto tlrc.\oture ontl ()tuses of the ll'eulth of Nations.

THEASIANMANAGER. APRIL.MAY1995

By Pnorrsson ManroAnroruroC. LorEz

FromCorporate AutouaqtoCorporate Democracy:

ASEAN HRD'sBiggest Challenge emocratic management produces maketheUnitedStates anindustrialpowJ\ erhouse. Germany and ercellent business and Japanusedthe I fsuperior I-l Wemustdo a bet- same techniques organizations. to rebuildafterWorld teriobof understanding thedynamicsof WarIl. Taylorism's trackrecordis prodiour nationaland corporateculturesthat gious. Taylor'sideas,formedduringtherise slow the changefrom traditionalhierarchiesto democraticteams;and thendo- of America'smassproductionmachine, ing therightthingstojudiciouslyandless evolved when workersn'ereilliterate painfullyspeedup the hansformation. and poor.Workerscameto the United "Democratic"doesnot meanthe carying with themeithertheirEuone States man-onevote,rule-by+he-majorityforms ropeanagrariantraditionsor their first describedin political science."Democratic" meansmanagementstylesthat havetheessential featuresof democracy, Frederick Ti\t'lor's includingbut not limited to the following: ttieu.:s sho;-^ tlml 1. Membershavethe right, and are he u:as n?rt(r e able,to makeintelligentchoicesanddecisions; factort' u:orker. 2.Basedon relevantinformationthey -haveunhinderedaccess to; and, 3.Theabilityto selectandimplement painful experienceswith Europeanindustheirchosenalternatives withoutpredis- tdalization. New World industrialrsts posingconditionsor duress. were copiesof their EuropeanpredecesNo oneconsciously hiresmoronsand sors,and the relationship:betweenfacidiots.Weall saywe hire only thebest; t o r y o w n e r s a n d w o r k e r s w e r e thatour employees areour partners;that adversarial. we givethemgoodpayandbenefits; Taylor, a devout Quaker, had a and thatwe giveemployees all thechances to strongly Puritan work ethic. Laziness growanddevelop.Companycredosand meant " handing your mind over to the values proclaim statements these. Having devil." Akey valueofTaylorwas his vrew saidthat,we all see gapsbetweenpro- of work, its division and conscientious nouncement andactualperformance. execution,but the crucial elements perSeientific and hurnanistie management In theearly1900sFrederick W Taylor gaveus "scientificmanagement." Itsphilosophy,tools, and techniqueshelped

tarn to horl ht:r,ieiued u,orkerstersusmunagdls. Robert Levering quotes Gordon Forward, president of Chaparral Steel, "Most saying, companiesassumeyou shouldchecLyour brainseverymorning at the factory door"

Taylor's views reflected a Cartesnn world view the world as a knowable a n d u l t i m dt e l y c o n t r o l l a b l m e achineand the elitist elementsof severalearlier philosophies.They also showed that he was never a factory worker. He believed that all work could be broken into component parts, and redesigned towards greaterefficiency.He tookAdam Smith's specializdtion the full distance.reducing eachtask to its simplest form. And srnce that was all a worker did, he should be very good at it. Taylordid notunderstand people very well. Taylor's disciplespursued his prrncrples. The Gilberths developedmotion studies which others elaboratedultimately to that very useful tool, Meth(MTM). But anyods-Time-Measurement one who has worked in a massproduction factory knows that drudgery and boredom areMTM's long-termcost,even with work rotation.Workersdevelopcoping mechanisms,which did notmean better work. They were among the phenomenathat EltonMdyo and his disciplesin "humanistic the school" tried to remedy. The worst elementsof "scientificmanagement" are neither over-specialization nor drudgerv The harm is inflicted most by the assumptionsabout workers and managers.Taylor himself wrote, "One type of man is neededto plan ahead an entirely different type to executethe work." For Taylor there is an elite gifted with the brains and the "right attitudes" who are qualified to manage;and a group whose disposition and lesserendowments qualify them only for manual APRIL-MAY 1995. THEAsrA\ MANACER

work, executingthe ordersof the manage r s .V a v o a n d h i sd i 5 c i p l ed. i d n o t d i c a gree with the essenceof Taylor's views. The major difference between the two schoolswas the form of maniPulation they choseto subjectworkers to-Taylor with materialcarrotsand sticks,Mayo by playing on their most basicand immediate needs. For half a century these ideas have beenthe bedrockofmanagementeduca"basic truths" in the tion, integrated as current psychology and sociology of work. It is best representedby the pyramidical Tableof Organizations: The breakdown came when Japan eroded American indushial dominance. A whole seriesofbooks onJapanesemanagementand excellentmanagementwere written. Theseworks broke our old models of the kind of managementthat prod u c e d g l o b a l l yc o m p e t i t i v eo r g a n i z d tions.They say incrementalchangeswill not rvork, that we need a reconstructron. But we need to tear down beforewe can rebuild. Of course, we shouldn't throw everything out. There are many useful componentsin the old model.Whensome of the basic components of the old are properly integrated with new elements, they contribute positively.The question is, which elementsdo we retain to integrate with which new elementsand in what manner? Reworking hasbeen hard. The foundationsofour old beliefsrun deep. These are the elementsthat have melded with aspectsof Asian culture and socio-eco-

HUflXI

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F i g 1.

THEASIANMANAGER. APRIL-MAY1995

thewayswe dividefuncthathaveconnomicrealities tionsand vestvalueson tdbutedto thepersistence of thesefunctions. what many havekindly ht lJnhasa Melavuand ln Bahasa called"traditional"or "feuthc bossis thehaBahasa Indonesia. dalistic"elementsinASEAN Kepala, word for boss or ditional g e n e r a l s o c i e t i e si n and hcad:the leaderis kepnlr-head. ASEAN companiesin parhcadis held The headis where the ticular. brainis.Thebrainthinks. Several commoncultural high. It interpretsstimuli;deAsian culthemesamong rives information from tures influencemanagerial are Workers data; and craftsdecisions t h i n k i n g .W h i l e m a n y o f Kaki-tangan, information. It confrom theseelementsareundergoaction steps ceptualizes ing irreversiblechanges, they fect and how these and decides havebeenslowingtheprochands;the will be carriedout. The esswhile causingproblems, und fcet decisionsand actions extractinga pricein low mohand.s gcl then are hansmittedto raleandindustrialstrife.The therestof thebodyfor eximpacts vary, and while ecutron. they are exhibiteddecreasIn thesetwo related ingly in daily behavior,they feet workersare kaki-tangan, assustaining languages, arestill formallyexpressed Twoarees- andhands-brawn.Theygivedatato the valuesof differentsocieties. peciallyimportantandarethemostcom- brain,but their majorfunctionis to execute the brain'sorders.The feet and monlyencountered. y we associ- handsgetdirty.Thebraininsidethehead Thefirstis a sJcirliliernrch in theprotective but hascounter- is heldhigh,ensconched atewith Confucianism The armorof the hardest,mosttightly fitted partsinallAsianhaditionalsocieties. Husband, and bonesin thebody. orderofGod,King,Father, While therearenewet lessemotionFriendin Chinesesocieties havecounterpartsin MalayandIndonesian societies, ally ladenwordsnow theemotionsassoincludingBruneiandthePhilippinesfor ciatedwith theold wordsmay not have In fact,the newwords ethnolinguistic and historicalreasons, beenneutralized. andin IndoChinese andin Thaisocieties. used in Indonesia,anakbush-ftuitfll] After WorldWarII Kingswerereplaced child, haveundertonesof paternalism. which but equallylmperious, Thennak,child,musthavea bapak, by lessvenerated "father"and "protechastwo meanings, if benevolent, Governments. that tot" both denotinga superiorposihon. Thereareloyaltiesandcourtesies is mutualbut it is clear our societies still expectus to give God, Thedependency larentalwiswe who normallydominates. As societies King,and Government. professour obedience to and reverethe dom and unselfishcaring,and the foolof children,arethe stuffof inSupreme Being.TheAlmighty'sblessings hardiness kept a ruler in power,becausepeople ternational hit songs like Freddy le- Aguilar'sAnak. obeytheanointedKing.Governments "Scientific andAsian management" gitimizethemselves similarlyby invok"Vox populi,vox Dei."Theycitethat traditionsstronglyreinforceeachother ing, "scientific manageprinciplewhentheirproposedmeasures Cenhalauthorityin arepopularlyapproved.Theimplication ment"blendswith preordainedhierarchy. andthese, Wheneducationalattainmentbecameanis thattheiractionsareblessed to othermeasurefor one'spreparedness andthey,mustbe followed. themoreodiousformof wealthThe secondpersistentculturalform manage, by the which moreclearlyreflectstheelitistele- basedsocialpositionwasreplaced ment are ffu wordswe useto designate formallyeducatedelite whosesocialpoleadersand managers on onehand,and sitionswere directlyproportionalto the after employeesand workers on the other. numberof academicabbreviations reasons why denames. These are when refertheir the words we use Consider to and enchantment The spite our exposure their workers. ring to bossesand theyreflect with new trendsin managingpeoplethai words areimportantbecause

many Asian managers still remain authoritarian and paternalistic. Shifring tldes Several developments have shaken scientificmanagementand the systemof beliefsthat buttressedit. Theseinclude: 1. A changeto the view of the world as a continuously evolving biological organism rather than the Cartesianmachine. 2. Abetter understandingof man asa psycho-biologicalorganism with a brarn capableof many modes of functioning; 3. An increasingknowledge of our universe with a deeper and more complete understandingof how we ought to reldteamonSourselvesand to our environment; and, 4. A reawakeningto our other dimensionsthat weceasedattendingto, e.g.,our spirituality and psycho-emotionaldualitres. The first wave of changesbrought about by theseand other forcesstimulate a secondwaveofchangeswhich are typically more difficult to anticipate.The second wave brings on the third, and the fourth, and so on. We also know that these waves of changesfeedbacktoand oftenchangethe

original forcesthat brought them about. And it is only now that we have become more consciousof our need to give these dynamicsmore attentionand understand them asbestwecan so wecan proactively deal with them. The environment boils with competition. Only the hardiest,most adaptive, and agile companies with the greatest stamina will survive. Thesecharacteristics are developedand nurtured consciously. Harvard's John P Kotter identified four environmentdland four organizational changesthat managersmust deal with effectively.These forces shown in figure 2 are forcing us to rethink our definitions of managing and leading. Kotter cites internationalizationof competition,deregulation,the maturation of markets, and the increasingspeed of technologicaldevelopmentasthe four environmental forces. The four corporate changesare growth of firms, product div e r s i ifc a t i o n ,i n t e r n a t i o n ael r p a n s i o n , and the increaseduse of sophisticated technologies.He concludes that better leadershipis neededto steercompanres through these dangerous times. In fact, there has been much searchingfor new organization forms and new leadership

Fig. 2 The Ghrnging Busincsr and lta Con3equences fol dre Leader3hip ;actor Environm;ntal Changes

0rganizational Changes

.lnternationalization of c0mpsl|tlon .0eregulation .Thematumtion of rnarkets .Theincroasing spsedof lechnological development

.GroMhoffims . Product diversilication . International expansion . Theincreased useof sophisticated technologies

stylesfor the 21stCentury.JanCarlzon,Max DePree,Clay Carr, and D. Quinn Mills have written excellentbooks on participatoryleadership, support for front line initiatives,teams andclusters.

Naisbitt, Aburdene, and Featherhaveunderscoredkotter with their own lists of changes.In MegafrendsNaisbitt listIncreasing competitive intensity Increasrng cornplexity ed shifts from hierarinmostIndustres ofmostiims chies to networks of Increasrng neeot0rcnanqe:lowar0 Incfeasrnq 0rnrcu ty 0t teams in organizations; a higher levelofperfomance making chanqes in an le.9., from representativedeproductivity, m0re moreinnovation, etficentandetfective way newapproaches to marketing and mocracyto partlcrpatory distribution) democracy; and from Leadership is need€d in more Providing etfective leadership the hesitantuse of techandmorejobs is increasingly nology to its enthusiastic ditficult voluntary adaptation Theleadership with increasesin the factor hasbecome stgnil'canlly morermportant needfor human contact. T h eL e a d e f s hFr p acrof In Megntrends2000, coE y J o h nP K o t t eH r a r v a rB d u sn e s sS c h o o l authored with Aburd-

HIGHPERFOBI\4ANCE BUSINESS

Source Arrlrur D L rt e Manaqemenr Fevew l99i

Fig.3 ene,headded changesinglobal lifestyles, the resurgenceof biology asa framework and the rise of bio-technologyasthe technology of the future, and the emergence of woman power. Featheridentified 35 C-forces(CClobal) grouped into four categones: socialmotivationsaffectingthe satisfying of psychologicaldrives;technologicalinnovations creating the information-rich leisure society;economicmodernizatron and redishibution planetary riches;and, political reformation and the restructuring of political power Sally Helgensenand Alice G. Sargent in their books suggest the use of more feminine/matemalmanagerialstylesand values. Many leadership and effective managerialbehavior models we have been using for decades-including the "grid" (Mouton "situational & Blake), leadership" (Blanchard& Hershey),and "normativeleadership"(Vroom & Yetton, Vroom & lago)-actually incorporate traits mentioned by Helgensen and Sargent. Thebehaviorswe callmaternal/feminine include qualitiesofbeing nurturing, beinglessdirectiveandauthoritarianand being mgre participatoryand inquiring, and being more emotionally involved, caring, helping, and being more concerned with getting the team working well together than assertingpersonal power. But towards what ends are we to do all this refocusing on democratic managerial forms? To what use are we going to harnessthe powers liberatedby this model of management? APRrL-MAY 1995. THEAsrANMANAGER

Comlrcl.ltlve fllness Towartls delightinglur custlmers, our reason existence, by continuously meel for ingandimproaing uponagreed requirntents! would be JohnMacDonald'sand John Pigott'sreply.Thecustomer is king.And while our customers areboth thereason and the sourceof the meansof our corporatelife and growthon onehand,on theotherit is our employees whoareour majorresources in servingthecustomers directly or indirectly.They are our frontlinersin the servicedeliverychan. Theyarethe firct to sensefirst to sense customer'sresponses. Therelationship betweenhigh levels satisfaction andthededicaof cusromer

Fig.5 The Five Principles of Mars qlraiiyisour l. 0lalily Theconsumer isourboss, work, andvalue formoney isourgoa. wedemand total Z BeipomitililyAslndviduah, rcsponsibrlityfromourselves; asassociates,we suppon theresponsiblties ofothers 3,l[0tualityA mutual beielils ashared befetil;a sharedbenefiiwl endure. 4, ElicioncyWeuse€sources toth€Iulestwasle nothifg, anddoof y whatwecafdobest 5.freedomWeneedfreedom toshape ouriutureiwe reedp.oitto.eman free

thechallenge to showtheirbestwhilecooperatingwithothers, andproducesomethingtheycanbeproudof. Thecredoof Johnson& Johnsonand thevaluesstatement of MarsCandyCorporationshowhow thepdmacyof customer satisfactionhas helpedthe two companies attdindndmaintaintheposiin lheirrespective intionsof excellence dustries.By takingcareof thecustomet theemployee,and thecommunityfirst, thesecompanies havemademoremoney for theirshareholders andhavegainedfi-

tion to work of employees who seesatisfactionand pride in their work is most graphicallyillushatedin a popularArthur D. Little Groupdiagram.ThetophassatMl Fhmd0dierfrotdimrs isfiedrepeatcustomers, andthebottomhashapfrurdixs Sryewison py and dedicatedemFig.4 tliddolhmpn ployees.While ADL The John3on & Johnson Credo saysnothingaboutdeTWilorryrsdd mocraticmanagement Our Credo inthediagram,theywill agreethat it is a key nurses Webelieve o!r lilst responsibility s to thedoctors, andpatents, to rnothers andfathers, andto all others whouseourproducts andservices. contributorto thatsatisn rne€ting wedomustbeof highquality theirneeds everything factionandpride. Wemustconstantly striveto reduce o!r costs Competitivefitness prces inorderto maintain r€asonable prompty customers'0rders mustbeservced andaccufately. is the ability to anticianddistributors mLsthaveanopportun 1y Oursuppliers Fig.6 pate and promptly reto make a fairproft spondtoevolvingneeds Weareresponsible to ouremployees anddesiresof our marthern€nandwornen whoworkwith!s througholl lhewofld kets.JanCarlzonmakes nancialstrengthto havegreaterfreedom. Everyone mLstbeconsderedasanindivdlal. anexcellent casefor emre theirmerit Wemustrespecttheir dignity andrecogn Thenew viewpointrequiresthat we intherjobs They musthave a sense ofsec!rity powermentof thefront- repositionour old diagramsto properly Compensation m!stbefairandadequate. line in his book, Mo- reflectnot only the pdmacyof the cuscofditions clean, orderly andsaie andworking mentsof Truth.He con- tomet but to betterput the functionsof Ernployees mustleelfree tomake suggestions andcomplaints lherem!stbeequalopponun tyior employment, deveoprnent tendsthat the market's thevariouspeoplein chainmoreinsynch andadvancernent forthoseq!alified. perception of the com- with thenew thinking. competent management, andtheiractions mustbejLrst Wemustprovide pany dependson "the andethical. The top and middlemanager'sjobs onethousandmoments are to give frontlinersthe neededreWearerespons bleto th€comrnLrnities 1nwhichwe liveandwork of truth" wherecustom- sources to supplythecustomerc theconandto theworldcomrnunity aswei ers meet the company tinuousdelight MacDonaldand Pigott goodwo*s andcharities WernustbeOood-c tDens support andbearourfa r shareof taxes. faceto facethroughem- spokeof. Theyarenow facilitatorsand Wernustencourage civicimprovements andbetterhealthandeducation ployees, mostlyrank & marshalsof resources prcperty towards addressn in goodorderthe weareprivileged to !se Wem!stmainta file frontliners.Clay ing market requirementsin proactive protecting theenvronment andnaturaresources. Carr echoesCarlzon ways. Ourfnalresp0nsibility s toourslockho ders. eloquently when he protrt. Busrness mustmake a sound saysthatcustome$benmust ment with new We exper deas. Edito6's nole: In the next i.sue of TAM mustbecarried veprograms deveop€d Research on,innoval Prof. Lopez will addres. how tho HRD efit themostwhen"our paidior andmistakes proto$ionals can adapt to thes6 lhiftt people to are committed mustbepurchased, newfacI t esprovded NeweqLripment in mrnagement thinking, thecompanyandto dolaunched andnewproducts foradverse times R€serves mustbecreated to provide ing their jobs compe- Prcf.Mntto A tonioG.I.aWzislhePililinas ShrllCarWhenweoperate according to theseprinciples, tently."This happens pardtionPloftssarof Plblit Ailmi islratiorlandAssislthestockholders a fairreturn shoud realize whenself-management anl Detinfor the ExeculilreDel,aolittldttPrognnt. His depelopinbrestsare nfi agetialde1)elapmoll, providesthemthe con- currenl menl mnn|lene l, cross-culhtll.lmnnagem t, atd trol and responsibility, prajectdeltlopnenl n d managentnl.

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THEAslAN MANAGER. APRIL-MA\1995

INESS RTVIEW Dus f'

3f B Y P R O F E S S OCRA t s I N oA . M E N D o Z A

TheOrgarrvaf,on oftheFuture high intensitvcarthquakehas at least one virtue. lt rclent lesslv,unerringlv scp.iratesthe good from the bad. The poorly con. t r u c t e Jr o a J - .b r r J t e . . r n L bI r r i l d i n g , rupture,crackand crunble. A temblor i m p l ; c . r b hr c r r ' r l . l l ) er t , ir r i l hi n :t h ei n ferior material,thc sloppv work, the unprolcssiorralattitucles,and perhaps,even ihe corrupt greedthat rvmt into it. Thc weli built constructions ride out trcmors unscathed. Like ihe Romanroadsof old, thevendureail thefranticquiveringand quakingunshaken.Thevperdure. The lvorld hasjust l eathereda recession that has inflicted on busincssthe sane havocu.hatearthquakt'sdo to cir,'il n'orks. lt has erposeclthc far.rlisjnhcrcnt in our companies'organizational structures.Ii has unco\'ered our misconccptionsaboutthe nature of cmplovment.lt has revealedthe consecluences, in termsof motivation and commitment, that these mistakeshave led to. Ii compclsus to re-thinkour philosophvon organizationand our policieson cmplovmcnf. The pastrecession obligedsome the of rvorld'siargest,most sophisticated companiesb reclucetheir manp0rverc0mplcments,to eliminatethef,rtfronl theirorganizations both in the United Statesas rveil ,rs in the restof the ivorld I'here their o!erseasopcrationsaresituated. r Ccneral Motors, in order to rcgain competitivcness,has not onlv 3E

had to lav-off rvorkersbut alsok) closecntire plantsd0u n. . Caterpillar,in orclerto fight off compeiitionfrom Komatsu,cut its work force bv 319iand thercbyraisedthc producti\. itv ol those that rernainedfrom gllE6,000 pcr man to $2M per man. . I B V . i n o r J Lr t ,' - u r \ i r L. h , l Jt l E,irt' up its fondlv ht'ld poiicv of lifetimeem, plovment. Bv beingrvilling to cut their manpo$,er costsio thc bone,a lot of Americancompanicshave regainedtheir competitive ness.Thc carcompanies for eramplchat,e re-u,onm,rrkeisharein thc'U.S.from thc i m l o r l . C ' , m p ut L ' (r " m p a n i *r l r l i . C , , r n paq,Apple,and IBM havemaclesubstan-

Weshouldprepare fora"jobless"world, onepeopledmostlY with workerswho are temporaries, part-timers, consuftants, contrad workers, and veryfew,if any, permanentworkers.

tial inroadsinb theJapanese microcompulcr market. The World Economjc Forurn basedin Su'itzerlandannounctd rec e n t l v t h a t i n 1 9 9 3t h t ' U . S . h a d i h e \\'orld's most competitiveeconomy.Japan, u'hich traiied Singapore,$,as only the thirclmostcompetitive. This nerv-foundAmericancompetitivenesshas not come rvithout a cost. Thereustd to be an unspokenagreement th.ri in exchangefor a reasonableassur.rnceof a permanentjob,olsecuritr'of ienu r o . e n r l l o r e e . r r o u l t l g r l e ( ( ' m p d nc \ their lovaltv, commitmenl, and the exer ciseot sonc iniiiative.The rvavesof lav, , [ [ r d o r r ' r r . i z i n qr .i g . h t - ' r z r n grra. t i u n , i l izings,deJaverings, restruciurings,and reenrinccrin5.pror, 'leLlbr thcrccentre ccssionhar,eIeft this age-oldpsvchologicalcontracttatteredand torn. Com panicsnorr ha\reto find a new basisfor, a ner{ reasonrvhv employeesshould ( , , m m i rt o t h t - mt h e i rl . r v a l t v . r n dr n r ti,rti!c.Tli- iruni. th,tt\ h,ttcon)p,rnie. had to do in ordcr b be globallvcompetiti\,e-trim their rvorkforcc thus making their remaining workers morc p r o J u c l i v c r ra . a l , ot h cc a u . eo f t h e i r losingacompetitiveeclge,namelv,emploveelovaltvand commiiment. Thc urgencvoi thesearchfor a neu covenantcannotbe ovcr-emphasized: in a globallv competitiveuorld, u'orker participationhas increasinglvbecome a prerequisitt'for success.In the frenzv , ' i i h c - e . r r c h . o m cr n t e r e . t i n Bi ! i e , i . havebeentossedup to beexamincdand ,rnalvzed.Thereis thc suggestion,for AIRIL M.\) 1995 . TIIi. A5IA\ N4A\ACER

example,from an Englishmanagement only the strategicfunctionswithin the gurutCharles Handy,authorof fte,4ge company: productdesign,process desigry ol Unreason antl TheAgeof Paratlox\that marketing,informationand financial we shouldpreparefor a "jobless"world, manaBement. All theotherwork.particuone peopledmostlywith workerswho larly thosethatrequirea lot oflow skilled part-timers, aretemporades, consultants, workers,it farmsoutto independent supcontractworkers,and very few, if any, pliers.Theseconhactors whomitcanconpermanentworkersat specificjobs,An- v e n i e n t l d y r o p d u r i n ga d o w n t u r ni n "buy" is that sales do othersuggestion companies themanufacturing, distribution, the loyaltyand the creativityof their advertisingand promotions. This networkersby offeringthemtrainingwhich work kind of organization, very similar will not only developtheir skills for theirpresentemployment but to alsoexpandtheircompetencies enhance theirfutureemployability. The mostvaluableupshotof thesesuggestions is thattheyremind us thatour ideasoforganization and employmentderive mainly from a classicalWestern archetype:a monolithic,hierarchicalorganizationmannedby permanentworkers,very egalitarian,non-discriminating, democratic.They also recallto mind that thereare otherprototypical organizations. TaketheJapanese model for example.It is very muchunlike the Westerndemocraticmodel.Itis,in fact,elitist.It favon thâ&#x201A;Źtalentedfew,theminority to whomlifetimeemployment is offered. Contraryto popularimpression, only to theJapanese keiretsu,is asflexibleas workforceare part anaccordion. 28%of the Japanese It pampersthosewhohave of the permanent,lifetimeemployment the criticalcompetencies neededby the system.Thesechosenfew constitutethe companyto retainits competitiveedge. eliteofthelaborforce.Theyhavethecriti- It carelessly usesand callouslydiscards thattheir com- thosewhoseskillsareeasilyduplicable. calskillsandcompetencies paniesneedto pursuetheir long-runstratDuringtherecentrecession theWestegies.Because theyareassured of lifetime ernpresswasfull of predictions thatthe theycandevoteall theiren- Japanese would giveup theirpracticeof employment, ergies,their initiative,their creativityto lifetime employment.The din grew solvingthecompany'sproblemsandex- louderastheYenstrengthened againstthe ploitingits opportunities. Thecompany dollarandeventuallybrokethroughthe thushastheirlife-longloyalty. 100barrierTheJapanese replywasfirm All the restof the work-forceeither andunequivocal. KeizoYamajiof Canon workastemporaryseasonal, or part-time Inc. said, "One way to gaugethe true workersor belongto supplieror sewice abilitiesof management is whetherthey that constitutethe restof the canrestrucfurea companywithout laycompanies maincompany'skeiretsu.Theyarecon- offs.I don't respecta managerwho sudsidered expendable duringdownturns in denlyfindsexpendable workers."In the theeconomy because theydo not brjng samevein,Norio Ohga,Sony'smusical strategiccompetencies to thecompany. presidentremarked,"Wesimplycannot SomeWestern firmshaveadoptedthe fire people.It would only conhibuteto elitist modelof organization.Nike, the theworseningoftheeconomy, andwereathleticshoecompany, for example,does ally can't afford that." ToyooGyohten,

As beneficiaries of sterneducation

theAnglo-Saxon

systemof laborlaws, masf,Sau|iileastkhns

areenotionawpulld

andlegallypushed

towar&prefening

the'classiiml" argankdion.

THEASIANMANAGER. APRIL-MAY1995

president of theBankofTokyo,confirmed a wide-spread feeling,"No matterwhat happens,we in Japando not believethe market should be a jungle. If profit maximization becomes our only motive, we will run out of control."LastOctobet with therecession showingsignsof coming to an end,Fortunemagazinefinally concluded,"No, JapanInc.likely won't waterdownitsallegiance toemployees..." Whatwasleft unsaid,however,wasthat thelogicof Japanese orgamzationsdifferedfrom that of the Americans'as applesto oranges. After a life-timeof analyzingtheir own demothe busicraticorganizations, nessjournalistsof the West werepoorly preparedto confronttherealityofJapan'selitist organizations. The recesthat sion-induced adjustments they predictedwere taking placebutbeneath thesurfaceamongthe expendables, the suppliers,and the contractors-and not in thecorecompanieswherethelife-timeemploymentsystemwas firmly entrenched. Decidingwhatkindsoforganizationswe should build policies andwhatemployment we shouldadoptto carryout plansandto forgeour comour strategic paniesinto world-competitive weapons to ofdevelopment, arenoteasydecisions make.As beneficiaries of a Westerneducationandinheritorsof theAnglo-Saxon systemof laborlaws,mostof us SoutheastAsiansare emotionallypulled and Iegallypushedtowardspreferringthe "classical" organization whichdemocrahcally grantspermanentemploymentto all...atleastuntil the nextrecession. On theotherhandtheflexibilityandthepracticalityof theelitistorganization arerendereduninvitingby itscold-bloodedly rationalapproachto humanrelations. The decisionis as difficult as the choicesthe victimsof Mount Pinatubo havehad to makeas scaldingrivers of volcaniclaharthundered downtheslopes towardstheirfarmsandtheirhomes.But makeit, we must. P/of. Gabitlo A. Me1ldoza,is lhe hstitute's K.T. Li Professotin Internalionnl Matngemetil.

By PRoFESSoR BENJAMTN C. BeceoroN 1R.

Pastures: Green It Pays toThinkGreen h e r e a r e c o m p e l l i n gr e a s o n s longerproductlifetime,lesserpackaging public image. Effofts at hiding poor enfor businessto adopt ecological andrecyclability, etc.havebecome impor- vironmental practicesis costly and inefprinciplesandpolicies. tant sellingpoints. l e c t i v ew i t h t h e i n c r e a s e dv i g i l a n c e . llnvirorrnrerrlal proteclion offers opportunilies for profils. The dramaticrisein people'sawarenessol environmental issues in recent years has spawned a market for environmentfriendly products.A growing number of consumersare consideringthe effectsof a producton theenvironment whenmaling purchasedecisions,even if they pay more.or go a longern ay.Tnlgo2,theglobal market for environmentally sound productsand serviceswas worth US$200 B, accordingto estimatesby the OECD, and is growing an average5.5%a year MarkStreet,in his presentationat the A . i a - P a c i f i cC o n l e r e n c eo n m e r g i n g Businessand the Environment, cited a classicsuccessstory in ecomarketing, British Polvthene. [n the course of exploring the possibility of recycling low density polyethyleneto make new products, it stumbled, after three years and â&#x201A;Ź2M of researchcosts,on a new product: a shopping bag made of recycled plastic. Being the only firm producing the ecofriendly bags, British Polythene corneredthe market and amassedsales and profits which transformedit from a common plastic manufacture to one of the industry leaders.lndeed.pro-environment features of products such as 40

Redesigning for pollution prerenliort can be cost-effeclive. An OECDsurveyof over000French environment technology projectshasfoundthat 6% savedmoneyon raw materials,65% conserved water,and 8%cut energyuse. Of 45 cleantechnologyprojectsin the Netherlands, 20savedmoney;the others didn't affectcostsoneway or another. Similarexamples in developingcountries abound.DelMontePhilippines, for example, reducedits wastewatervolumeby 1,000gallonsa minutewhenit introduced rvastecontrolprogramsin its pineapple processing plant.The companyrealized overPl.2M in annualsavingsby usingrecycledmaterialsin its operations. Indeed,wastemeansunnecessary expense.On onehand,wastemeansexcessiveuseof tesources suchasenergyand water.On the other,wastegenerates costs-costsfor collectingand handling, treatinganddisposing. EnYironmenaal consciousrress nrakei for a round ('.)rporaaeimage. Thepublicis becomingincreasingly intolerantof productionwith dehimentaleffects to theenvironment or arewasteful and polluting.A companywith a "green"reputationhasa morefavorable

backed by better funding, of environmentally conscious individuals and groupsruch as NCOs.and citizens'initiatives. Sarl:tions awail polluling and wasleful firms as more counlrir.s le$slate the lougher reslriclions on pollulion and resource use. [n many countries.companiesare being made to rectify damagedone to the env i r o n m e nitn t h ep a s t , s u c ha sc l e a n i n g up land contaminatedby pollutants and toxins. Thesemean more costs,including legal costs.Among recentexamples are Shell (Britain). which was fined 1 M pounds for polluting the river Mersey, and Wheeling Pittsburgh Steel (USA), which paid $ 1.6M for violating anti-pollution laws accordingto Sheet. Tcchrrologv in environmcntal proaeâ&#x201A;Źlion, an offshoot of enhanted enrironmental consciousrress worldwide, has crealed a nrarkea, and cu rrenlll- offers lroundless op;xrrtunities for making monev. According to Saburo Kawai, inthe same conference,many compdnieshavestrucl gold developing and selling green technologyr sewagetreatment plants, solar cells, pollutron APRrL-MAY 1995. THEAsrANMANAGER

control equipment, low emission power plants, and ecofriendly manufacturing The businessopportunities can processes. be categorizedas follows: firstly, those dealing with environmental degradation in both its preventive and curative aspects, and secondly,those dealing with the creation of a better human environment. LucasDelattrewrites in the Guardian Weeklythat Germany is well aheadof the "green" pack in the world market for products.It accountsfor 277oof the total market, compared with the US' 76Voand Japan's13%.SomeDM 6 B has been in"clean" vestedin equipment in Germany in the past decade.A network of 1,500 small and medium-sizedcompaniesserve the anti-pollution requirementsof industries such asin the reduction of emissions of sulphur dioxide, nitrogen and heavy metal dust. Half of thesewere set uD in the past decade. Ecologically cons(iious companies attract gtreater opportunities for expansion. Investigating of the environmental profile of a company is becoming more common in corporatetakeovers, mergers,and IPOs.Moreover,some major insurancecompaniesrequirecertain environmental data or featuresprior to coverage.The possibility of liabilities that could incur costsor damagethe company's reputation is not encouraging.The FleetFactorscasein the US.1990.offersa lessonfor banks around the world to be wary of the environmental profile of a company..Fleet lent money out to a client firm and took land ascollateral.When the client defaulted, Fleetforeclosed and tried to sell the land. They discoveredthat the Iand was contaminatedwith hazardous waste. Fleet was subsequentlyordered by government to clean up the waste and shoulder the costs for the cleanup, according to Street. Holistic Management How can businessmanagethe environment to its advantage? The environment is a complex system of highly interconnectedparts. A change in one component of the total complex affects the entire system. Hence, measures intended to protect the environment should be planned as holistic, multi-face t e d c o n c e p t s .U n i d i m e n s i o n a l ,e . 9 . , . APRIL-MAY THEASIANMANAGER 1995

purely technological,measures to solve environmentalproblemsleadin rarecases to success, and mostly to a dead end. At the core of a holistic approach to environmentalproblemsis an environmental managementsystem which includes measuresfor environment rehabilitation, support of authorities,environmental monitoring, environmental educationfor personnel,and conductof ecofriendly production and trade practices. An environmentalmanagementsystem requires a firm to set up an environmental policy. The policy must be relevantto the firm's businessactivitiesand the effectsof theseto the environment. It must describewhich of the company activities are covered by the system.Once formulated, the policy must be communicatedand implemented throughout the company aswell asmade availableto the public. The implementation of the system necessarilyimplies organizationaladjustments.The firm must have staff who can implement policy, examine and track environmental problems, take action to solve these problems, and act in emergencysituations.In Germany,legislation has institutionalizedthe post of an environmentalofficer,in chargeof implementing environmental policy. In other countries,thereis an emergingtrend to change the office and function of the CEO, to that of a CEEO,or chief executiveand environmental officer. Likewise, the firm must have environmentally-orientedpersonnel.Toward this, there should be opportunities for the staff not only to increasetheir awareness of the environment but also to channel suggestionsfor environmental policies and procedures.Further, the staff should be motivatedto work in an environmentally oriented atmosphere. The company must also understand its effectson the environment, by examining three key areas:first, communications from people with an interestin its environmental effects.These include costumersor the generalpublic, localauthorities, pressuregroups, staff,statutory bodies,and investors.Second,the actual or potential environmentalissuesrelating to businessactivities,including possible contaminationof land, emissionsto aiq, dischargesto water and other wastes,use of resources,and other effects such as

noise,smell,dust and the appearanceof the building, among others.Thesedata aregatheredand kept in an environmental effectsevaluation and registersystem. Third, legislation,policies,and codesor practicesrelating to the environment. Thesedata can be systematicallystored and accessedthrough a registerof legislative, regulatory and other policy requirements. Audit your practiees Thesethree sets of information form the basisof a firm's statementof environmental objectivesand targetsat all levels in the organization.The objectivesand targets are contained in an environmental managementprogram which shows the following: a)how the firm intendsto achieveits objectivesand targets;b) the staffresponsiblefor the various tasks;and c) the resourcesneeded.The plan is kept in order to allow monitoring of the environmental managementsystem-whether it is being followed, effective, or achieved. The program and the records of its implementationprovide the basisfor an environmental managementaudit, the processby which a firm checksthe soundness of its environmental management system.The audit checkswhether actions comply the its firm's environmentalplans and whether the results meet targetsand objectives.Hence, the audit analyzesresourceuse,waste generation,health and safety,and a host of environmental probIems in every aspectof the businessmanufacturing, supply, researchand development,design,packagingand impact on the community. The audit is a way of finding out what the companyis doing right so it canbuild on it, and what it is doing wrong so it can be corrected.It is likewise a tool for comparing the short-term cost of corrective measures againstlong-termgains. Indifferenceto the environment can be costly..Itis not only a bottom line issue. It can mean the differencebetween the successor failure of a company,and the survival or extinction of the human race. isa member ofthe Prof. Benjamin C.Bagadion,lr. DeaelopmentManagement Program Core Faculty. He teacheso courseon enaironmentdeaelopment and managementin the Master in Deaelopment Management (MDM) progrnm. A1

the past 25 years T-tor managementliterature fi I conectly pointedout th€ greaterimportanceof Effeciiveness-Doing the Right Things-over Efficimcy-Do ing ThingsRight.Yet in the field of man's scarcest resource-time, threegenerationsofbooks upon bookson timemanagement hadfocused on "working harder,smarter, and faster" How ironic that they continuedto emphasize efficienry. The ChecklistGeneration. TheAppoinhnentBook Generation.The Plannerand OrganizerGeneration. Thesegmerationshaveled us to getting morein lesstime. Yetwhy is therea lingeringabsence of inner peace.a feelingthat onds quality of life has not imgoved? Dnter thc louth gpneradon Weneeda betterway,one thatretainsthestrengthsof the previous generations,eliminatestheir weaknesses, and createsquality-of-life results. In Filsf lfttn8sFrlstStephenS. Coveyhelpusfocuson quality of life by designing a four quadrar\ttime management matrix shownbelow. Quadrant I represenbaciivities that are both "utent andimporhnt " suchasemergmcysituatiorsanddeadlines. They quickly point out that many activities get into this

quadrant due to procastination, lack of planning/directioIl or thetemporarythdll of overcomingcrisissihrations. "important Quadrant II is but not ugent." This includes activitiesthat would improve our quality of lifq but we find difficulty allocatingtime for. Developingmeaningful relationships,for example,fall in thiscategory.Timespenthere will in due time shrink our Quadnnt I. Quadrant III includes ac-

tivitiesthatarc"ugmt but not importanf to us. Perhapsimportant to someoneelse,or may iust appearto be irnportant. Thus,the name: "the phantomquadrant." Quadnnt IV containsactivitieswhichin reality arenot worth doing. Theyarernerely "tirne wasters." Wherethen dowefind the time to do the activities in

IMPOBTANCE.URGENCY MATRIX Not I {dsos .Pressino Probloms {€rdlin€-drivon proiocts,nettirg6,propraotioos

fll . h0nuplions, sonophono crlk .So$o ndl,sofionpoft . Soraftrtinls . M,nypmimrb.po$inonaftls . M&yPqulr.clivirs

tl . Prepantion . Pieveilion .Pl.nning . Rel.tionship building . Truerccreation I . Empowarment

. TriYia, busyrvo* .Jonkmail . Som!phonecalls . Iim€wlstors . -Escapg" oclivites

Quadnnt II? Thebestplaceto look is QuadrantIIL Developlng our owrr mf,trlx Beforewe construct our own Time Management Mahix, we must takestockol ourselves. Our mahix requires an anchorupon: a) ft:lfilling the four humanneedsto live, to love,to leam,and to leavea legacyandcapihlizingon their combinedcapacitiesbalance, synergyand "the fire within"

to energize us; b) Searching and incorporatingthe "true north" life principles:Need time tb develop and grow, Causeand Effect,etc.;and c) Understanding,developing, andfuily utilizing thefour human endowments- Selfawareness,Conscience,lndependentWill, and Creative Imagination-that truly lead us towardthe "hue north." Having establishedwho weareandwhatwewould like to be,we now takea joumey thatrequiresa healy investing of the self. The processin-. cludes: 1.Cornectingone'sanchor with VisionandMission; 2. Identifyingone'svarious life roles; 3. SelectingQuadrantII, the"importantbut noturgenf' goalsin eachroleandestablishing balance and synergy

amongtheseroles; 4.Creatinga decision-making frameworkfor the cornhg weekthateliminatesQuadrant III to give way to QuadrantII; 5.Exercising Integrityin the momentof choice;and 6.Evaluatingthepastweek. The bect and the brlghtadt ln the filo$r Havinghadtheprivilegeof readingbeforehandCovey's TheSeoen Habits ol Highly Et'People and Principlefectioe Caiercdkaduship,I canreadily concludethat First Things Firsf is the bestof them all. Written in plain language, Coveyrehrmsus to thebasics "WhatamI living my life for?" and in a non-condescending way instructsus stepby step how to get to wherewe want to be, and to havea genuine quality of life. Management principles and techniquesare applied to life itself. Wemanagelife, not conholit. It is a Why book. I(s an easyread,but a painfii oneas well. Bepreparedto reexamine what you believein, what principlesyou follow, what your philosophyin life is,and what you considerto be quality-of-life. It exposesthe falsehoodof moderndayhang-ups on "quick fix approaches, coF ton candy plea-sures attached to theUrgencyAddiction,and popcomsolutions." ItisaHowbook.Thisisnot abookfor bedtimereadingbut onefor doing and for genuine reflechng. Invest time, your heartandsoul your mind,and your totalbeingwhenyou take theiourneythat thebookprovides. This is a ioumey to a better,morefulfilled You. Ptof. EnricoC. Angtuacois a member ofthecorclacultyDftheMistet in Man(MM) Program.Hespeciolizes agement in statistics,quaflLitatioe analysis,maagement games,probleft 0t1ddecision analyses, andcotllpuf et arylicaliofis.

APRIL-MAY1995 . THEASIAN MANAGER

TheAsianManager FaxSuraey Name (optional) Nationality

l, lVhere does your companv source parts and componentsno* ? (Please indicatepercentage mix---c.g. Philippines40%; Asean-sO%) Japan-l0%; Local(Philippines) NIE's(Taiwan,HK Korea)

EU Others

%Asean(lncl.Sineapore) Ame ca -%US/North qalarat\

vo 9o %

2. Five vearsfrom now (by Year2000), how will the sourcing ofparts and components for your products look like? (Please indicatepercentase mix) Local(Philippines) NIE's(Taiwan,HK, Korea)

%Asean(lncl.Singapore) %US/North America %Japan %

EU Others

% 7a EA

3. Where does vour company sell/markel rour producls now? (Please indicatepercentage mix) Local(Philippines)

NIE's(Taiwan, HK,Korea) EU Others

Asean(Incl.Singapore) _% America -%US/North

7" % qa

%]apan EA

4. l'ive vearsfrom norr',what do you think vour markeawill knk like? (Please indicatepercentage mix) Local(Philippines) NIE's(Taiwan,HK, Korea) EU Others

7oAsean(lncl.Singapore) %US/NorthAnerica

_% -%

loJapat 7a

5. a. llas your componyever imporled paras/componenlsulilizing C[PT-AF'TA? Yes No Do not know b. llas your company ever exported products utilizing CEPT-AFTA? Yes L\O

Do not know

c. When vour compan! tries to import/export utilizing CEPT-AITA,what problems do you encounter? Pls.specify.

6. May we ask aboul your plans for ahefulure (bv the Year 2000)?Please checkappropriatespace. Will expandoperationsin your country Will relocate to otherASEANCountries Noneof theabove

Will expandoperationsin ASEAN Will expandoutsideof ASEAN

7. lvhat managementissuesdo vou think ahatAIM should address1o the Asian Managersregarding AI"TA?

Pleasef ax your answercto: Prof. Mai Kondo,Fax No. (632)817-9240. THEAsrANMANAGER. APRrL-MAY 1995

Don't misstheplane,AIM grads!

AIM is plotting a courseto network all of the alamni numbering over 22,000in 58 different countries. If you want to be on thatflight, be sure to accomplishtheform belowand FAX back immediately. -------'t

ATTENTION:

ALuMN! RELAroNsoFFrcE Fax No: (63-21A17924O

Name of Passenger

Program(s) / Year

Nickname

Birthdate

Marital Status

Home Address Home Phone Company Position

Dept./Division

BusinessAddress Tel. No.

Industry Any News?(personalor career)

Fax No.

Product

ffi#"mp,# EugenioL6pezFoufdation

IT'STruEAIMAruuxl PnOTITED FRoMSHTnED BUSTNESS OppoRTur\rTrES DearAIMAlumni, I seesomuchstrength in AIM-its Alumni,itsBoardsand itsFaculty, yetwe'renotevenscratching thesurface to use thisstrength-astrength otherswouldgivetheirrightarmfor. Let menotboreyouwith howAsiais growing.YouknowAsiansarebeginning to tradewith Asiansasneverbefore, andeverywesterncompany wantsa footholdin ourneckof thewoods. But fewhavea networktheycantapinto.\[hom do theyseewhenin KLor Taipei? Vherecantheygetsomereal informationin Manila? Howcantheymeeta potentialJVpartnerinJakafta? \ilho cantheyacquireor mergewith?Whom do theytrustandwherebestto buyservices from? A Filipinofriendwantedto sellpartsof a sugarmill to foreignbuyers;preferably Indonesian; anotherfriendwanted to explorethefeasibility of startinga CD-ROM drivefactoryin Asia.Thelistgoeson andon...businessmen wantingto buy or sellor invest,andneedinganintroduction. AIM'salumniis sittingon centercourtwith itsnerwork-andwe arenotcapitalizing on it. Isn'tit abouttimewe did? Thereis away.Thefirststepis to starta BusinessOpportunitiessectionin Tm Asnn MrulecrR.Andwe're startingonerightnow-this verynextissue.It'ssimple,Sendustheproductor service you'dliketo introduce to other alumni.\fle'llput it in thisnewBusinessOpportunitiessection, If youneeda partner or wantto selectamongdistribu"jobs torsin anothercountry,or wantto simplybuyor sell,let usknow.Weevenencourage wanted"and"jobsneeded" information. Ve'll becontacting majorrecruitment agencies to reportwhat'savailableout there. To makeit easyfor you,we'veincludedsomesampleadson thereverse side.Thebasicintroductory rate is US$55 f.orhalfa columninch(approximately for a full columninch(57mmby 25mm). 57 mmbyI2.5mm)andUS$95 Let'smakethisclassified BusinessOppornrnitiessectionin Tm Asnn MrulecrRa success! Sendmeyourcopy material-whatever it isyouwantto buy,sell,tradeor investin or broker.\[e'll billyou later. Sincerely,

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YOURSTRESS... ToanyoneI haveeverhad REDUCE GREETINGS! the privlage of teaching: I hopeyou are TAKEAVACATION!At,.. BORACAY in f ne health,economrcallysuccesstul, and on goodtermswithyourlocalincome tax authorities. am stillalivetoo. Best wishes. Bing Azanza. EXPEGTATIFATTENS

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Want to advertisein the AIM Exchange?ContactVanessaJaballasat 8924011ext.355 46

APRrL-MAY 1995. THEAshN MANAGER

merica'sstrategists month sentence,rvhich inareat sixesand sev cluded four l'hacks to the ens.At issue: horvto backside,rvas,in Mr. Clinton's

chartthe UnitedStates'moral rvords,"a mistake."Yetmany compass.Repeatcdlli rve inAmericans, in their vearning teNene in a hosi 0f nationsfor lau' and orcler,endorsed B o s n i a ,R w a n d a , S o m a l i a , Singapore'ssolutionand beHaiti-to redressgravc humoaned the Presiclcnt'sreman suffering.To date,our re- sponse in fact, threeout of sponseshave been uneven, four Americansliving in the r,ithout any clear-cut guide stedlebut crime-fteecilv,state Iines for engagement. haileclthe court's decision. There are also mixecl sigTo confusemattersfurther, nals on the trade front. First the Clinton administration exertedhigh handcd tactics u'ith China. To the chargin of manv liberals, the White House Iatcr recantedits hard line, electingto delink trade from human rights. In doing s o , t h e P r e s i d e n tp u r s u e d the"constructive engagement" logic of the Bush administration-arguing that more, not less, foreign trade was the best lvay to promote human rights. No doubt, Washington'sabout-facervas tempered by the r.recdfor Beijing's support in defusing North Korea'snuclearambitions, in reconciling the SpratlyIsJandsdispute, and in addressingthe fate of Hong Kong.But President Clinton's stops and starts confounded many nonetheless. In another rvidelv publicized incident, the White House delivered three separate appealsfor clemencvto s e v e r a il a r g c P a c i f i cB a s i n the Singaporeangovernment countries*Japan. China,Maon behalfofMichael P Fav the laysia,and Australia chas'18-year old American con- tised the White House for its victedofvandalism.Thefour- m o r a l i s t i c m e e d l i n g . L e e

Krvan Yel', non' Singapore's p r o b l e m s e l s c r v h e r e .T h e seniorminister,hat'ing scn'ecl \{hitc House rvas disgrace, 31vearsasprimeminisitr,ad- fullv siltnt on Turker',clcspite nonishedthe Clintonadmin- iis rvell-cl0cumenierl hisk)ry istration for its "missi0nar\) of torturinganclcletainingits messiarric zt'al" anrl llarned Kurd ish rlinoritv. Similarhi the UnitedStaiesthat it could thrcc najor recipientsof U.S. "find itself all alonein the Pa- m i l i t a r v p r 0 t c c t i o n S o r . r t h cific." Kore,r,SaudiArabia,anclKuIn a posi-Cold lvar \\ orld, \\'ait hale reprcsseclpeace W as h i n g t o n c a n n o l o n g e r iul oppositionpartieswith no blindlv trumpct humanitarian criticismfrom !\hshington. virtuesor piousprinciplesanci Bep orrd peaee

r' ..{:.,

must addrcssits consistent att e m p t s t o e s t a b l i s ha h i g h moral tone. For example,l'c took an aggressiveposturc in China,n'hileignoringsimilar

Besidt'sthtst inconsistencies,thcreis the rnort'scrious charseof hvpocdticalposturing. Manv foreigntrsu'onder h()!r thL.LrnitedStatescanutt e r i t s s an c t i n ] o n i o us p r o nounccn]entson humanitarian issuesrvith all 0f its difficulties,rthomc.Whenoutsiders ltllok.itthe Urited Stat!.s, they clo not sce solutionsto thornv human problems,but instcacibehold a societv iorn apartby yiolentcrime,failing schools,rveakfamilies,and in creasingillcgitimacv.Highprofilc shootings,actsof random violcnce,andcourtroom dramascapturcinternational heacllirres. Thanksto satellite tclc'r'ision,elob,rlimagesfJash o l T o n v a H a r di n g , J o e y Buttafuoco,the llobbits, the Menenclezbrothtrs,and O.J. S i m p s o n .S h o u l d u ' e s u r priscd that manv ioreigners ask:On rvhatmoral grounds canthc UnitedStatesofferad\,icc k) the rest of thc world? RicharciNixon, .rrguablv tht dean of foreienpolicv

Irr u pusl-(\tlrl IIitr trorlrl. l'Ltt.s h i ng'Ion rutrr rt o | ()ng'(,r b I i ru I l.t' trt u rrpe I lumtun i luriurt t:irl ttr'.sor. pi(ilt.s \tr.futr.iple.s. THEASI,\\ MA\ A.I I?. APRIL-MA\]995

T'omanJr f-[.5. multinationals, big hrotherism is usrong- headecl. Thesefirms refuse to impose U.S. labory enuironmental, or human rights standards on their ouerseas operations.

amongour post-WorldWarII presidents, may havesaid it best.In his final book,BEond he warned Americans Peace, that "other nations could threatento isolateus unless we do moreto improveliving conditionsin Detroit, Harlem,andsouthcentralLosAngeles." Ihenoh ethias Business,for its part, is equallyconfusedaboutits role in providingmoralleadership. As part of the shareholder revolution,U.S.basedactivists are exertin8 Pressureon Americanmultinationalsto fight the good fight abroad. This year,shareholdersare voting on variousethicalissuesrangingfrom Unocal'sinvestmentsin BurmatoAT&T's maquilndolesoperationsin Mexico,from bansagainsttoin theThird baccocompanies World to corporatedivestmentfrom Haiti. Yet many U.S. multinationals argue that the way othercountriesconducttheir businessis noneof our business.Tothem,big brotherism 48

Ratherthan is wrong-headed. "cultural imperialpractice refuse to imism,"thesefirms poseU.S.labot environmental,or humanrightsstandards operations. on their overseas Conversely,a growing number of altruisticMNCs feelobligedto adoptthesame kindsof lawsandethicalpractices abroadthat are norm backhome.Anything less,in their view,cheapensthe force of democraticcapitalism.A underthe leadingspokesman U.S.constitution." Human RightsWatch,a prominentrightsgroupurges America'semployersto adopt a voluntarybut uniformcode of conduct-agreeingnot to useproductsmadeby prison politiworkers,to discourage calindoctrinationin theworktheir place,and to encourage executivesto discussrights abuseswith local governments Yet,mostfirms prefer to developtheir own standards. For example, Levi Strauss& Co.'s"Guidelines for Country Selection"prohibit thecompanyfrom using or sellingproductsmadeby Gulaglabor,underagework-

ers,or in unsafeor unhealthy work settings.In the lasttwo years,the apParelmakerhas suspendedsourcing from China,Burma,and Perubecauseof their persistenthuman-rightsviolations. ReebokIntemational,WalMart Stores,DaytonHudson, Motorola,and Walt Disney follow similar guidelines. "Theissueis not whetherU,S. should be overbusinesses seas,but how they oPerate saysDoughCahn, overseas//' human-rightsdirecReebok's tor."It's aboutU.S.companies standingup for a setof prin.ciples."Nevertheless, the debateover "which principles" continuesto confoundmany in theexecutivesuite. Looking ahead In the closingyearsof the twentieth century,the United Statesis recognizingthe limits of superpowerstatus.We arediscoveringthat attemPting to exertWestemideason countrieswhoseculturalPreferenceslie elsewhereis like pushinga string.Hence,any notionsof high-mindedideal-

ism must be temperedwith pragmatism. hardheaded Whetherin businessor we shouldselect government, our moralinitiativescarefully, basis."Since ona case-by-case andsituationsdiffet" societies saysNationalSecurityAdvi"we must sorAnthony Lake. perceivein eachcasethemost effectivestrategyto achieve thegreatestresults." This is not to suggestthat America'sbusinessand governmentleadersshouldbackpedalon socialinjustices/nor put profitsaheadof principles. "If thereis to bemoralleadershipin theworld, it will have to be providedby the United States," saysAndrew Bard Schmooklen,author of The ot' of kibes:TheProblem Parable In the Eaolutiorn. Powerin Socinl yearsahead,moral intervention will requireclearercriteria-coupled with a greater commitmentto fix our shortcomingsat home..l

contributor DaoidA. Heenan , afrequent of the is a Trustee Strategy, to Business in Honolulu, Estateof lamesCampbell edbypermission Hawaii.Reprint fromthe author.

APRIL-MAY1995. TUEASIANMANAGER

n 1982,I madea studyon PolloLocoandChickenBaco- nomic situation prevailing in P150,000/sqm.Finally,Asia's the dressedchickenmar- lod, not to mentionthe mar- the Philippines. Apparently, biggest real estatedeal-Fort ket,togetherwith a "quick ket resurgence of the genera- the management problems Bonifacio- of P 38 B (USg1.6 anddirty"surveyon the mar- tions-oldMax FriedChicken existing now are preventing B) was consideredby many ket potentialof chickenprod- chain.Anytimenow,theKen- top executivesfrom seeing Filipino businessmenas too ucts in the fastfoodmarket. ny Rogers,Texas,and Pop- beyond their difficulties. This high a price. Cive it just one The resultsof the dressed eye'schickenrestaurants will mindset is one of turf protec- year, and should the Philipchickenstudy simply vali- maketheirdebuts. tion, or the maintenanceof pinesgrow at 6-7%now and datedcunentknowledge, but Thepresentverdict?In the market share; very reactive, at higher ratesin the years to the/nsf/ood surveyresultssur- P 4 B Philippinefast-food with only faint signs of pro- c o m e , t h e p r o j e c t s h o u l d prisedeverybody, because the market,the leadingproduct activity. prove to be a bonanza.We see marketpotentialfor fastfood in termsof marketshareis To their credit, however, h e r e a g a i n t h e m i n d s e t chickenproductswasextraor- chicken. onceI had hammeredout a 6mindtrap of the present at dinarilyhigh. Whathappened in 1982? 7% economicgrowth rate sce- work. After an uneventfulpres- Thestudyproponent's mind- nario and the totally different Proactivity means going entationof thedressedchick- setwasonlyondressed chick- playingfields it cancreate,the beyond the present.It needsa en part of the studt I excitvisualizingof situationsunder edly proposedsettingup a more probable assumptions, fastfood chain that offered then deciding under those various chickensandwich conditions. Is there a risk? In c o n c o c t i o nasn d c h i c k e n business,there are always snacks,and hamburgerand risks. Although strategicand hotdogsandwiches to caterto proactivedecisionsmay mean customerspreferringmore going out on a Iimb, just keep variety.If provensuccessful, in mind that the limb is where the downstreambenefitsto the fruit is. If proper planning the dressedchickenindustry is done and the execution of were tremendous. No deal. these plans are given attenThestudyproponentwasaltion, the limb can be made to readya successful dressed be as thick as the trunk and chickenoperator,and the risk is highly minimized. On fastfoodfeatureof the study the other hand, planning for wasincludedsimplyto project the fufure under presentconthedemandof chicken. ditions createsa limb thin Yearslater McDonald's enough to break should comIaunchedits highly successpetition adopt an agressive ful "McChicken"sandwich, and proactivestance. followed closely by the Speakingof hees,there is "Chunky" chickensandwich en, their "bread and butter" executives in theseworkshops a song that goes "Rock-a-bye and popular"ChickenJoy" of product line. Chicken sand- immediatelyswitchedfrom a baby,on the heetop.When the J o l l i b e eM . c D o n a l d ' st h e n wichesand snackswere years p e s s i m i s t i ca n d r e a c t i v e wind blows, the cradle will introduced"Chicken McNug- aheadof their time and were mind-setto onethat wasop- rock." The winds of change gets"and chickenmeal, while not part of the formula for timisticand proactive.Real are sweeping the world, parShakey'scameout with its success.Ironically,the propo- estateexarnples helpedin this ticularly Asia. If businessmen "Chick n' Chips" and Pizza n e n t h a s n o w e n t e r e d t h e switchingof mindsets,such are too engrossedover the Hut with its "Szechuan chick- fastfood market, over a decade aswhatusedto beP600/sqm presentand do not adjust fast en"pizza.Fastfood chainslike after the idea wasbroachedto (in an exclusivesubdivision) enough to emerging changes Wendy's, TropicalHut,Smok- them, with chicken as the becameP6,000/sqmas soon and ride on its crestto seeor ey's,BurgerMachine,Ken- main product. as the economyimproved. -even createfuture changes, fucky,andnewcomer Carl'sJr In numerous strategyforWi|Jl.6-7%growth rate pros- the cradle-to-graveconcept soonwereofferingtheirchick- mulation workshops I have pectsat present,this same may literally be actualized. en sandwichversions.Lechon conducted,the mindsetmind- P6000/sqmarearecentlybeG. Gfllltgos,lr. is lheSan manok(grilled.chicken)be- trap paradigm of presentsuc- c a m e P l 5 , 0 0 0 / s q m i n a Prof.lesLts MigutlCorporntion Prot'essor 0tI ter d camea craze in the mid-80s, cessformulae frequently sur- year'stime.What was sold ti'nflL Entrrlri! Delelapfitnl nl th( andtheAndok'sandBaliwag faced.Worse,the assumptions for what wasconsideredtop AsinnlnstihLttolMnnngtwnt, u,ltrc he chainscapitalized t'or the pasl on this.Re- supporting this thinking were bucksthenin Makati'sfinan- hash:e n hlllime prot'.ssot 17 rlenr;j.Hc is alsathc Ch1tl n atd centyearssawtheemergence basedon anothermindtrap of cial districtfor P72,000/sqm Prtsidtlll of tfu AsianCo s lttng and of alfchickenhousessuchas the present: the current eco- two yearsago now sellsfor TramirtgCrouT,. THEAsrANMANACER. ApRrL-MAy1995

ver sincethe Mexican Crisis, n'hen thc Mexican pcsoand the Mexi can Stock Erchange (Bolsa)

mitted by ihe Mexican gor. serves.But tht' Mexican Fi e r n n c n t e s p e c i a l l vt h e F i - nanceMinistet in a shorvof "machisrno," nanceMinister. decidedto cle7. TheMexicqn1teso,uulike value u ithor.rtthe neccssarv declined bv more ih,rn filiv Asioncwrencies,utns fixedbythe ntoneLtryreserves. pcr centin raJue,the emerâ&#x201A;Źi- Ce ttql Bark.lt is usuallvde3. Moreo\,et to protcct forjng market countrits of Asia valucd drasticallycvcry six cign investors rvho alrearly havestronglvand in our opininvestc'din Mcxico and so v e a r s .T h i s d e v a l u a t i o ni s ion rightlv argucd that thev done bv the outgoing Finance l.ould lose in a cievaiuation, "anotherMexico." are n0t Minisierso that the incoming thecomnon practiceis for ihe Thev mcan that their econo FinanceMinister and incom- FinanceMinisterto informthe "the mies are not s a m e ing Presidentare sparedthe investors of the impending IVIexico"in terms 0f trade publicblarne.In this case,the devaluationso that ihcy could deficits, short-tcrm foreign i n c o m i n g F i n a n c eM i n i s t e r at leastminimizedtheiriosses. borrowings,and politicalinstabiliiv We argue that thcir cause would be beiter serveclif thev focusedon the Management Factor in the Mexican Crisis. Contrarv to the prevailing -,q.$:.r view thnt ihc NlcxicanCrisis arose()utof the economicconditions of the M erican VICTORS. \. PROFESSOR economyand could havc bccn , LIMLINGAN avoided, we argue otherrvise. In fact the MexicanCrisis did not arise out of the economic condiiions or cven tire economicpoliciesol the Vexi can governmcnt.Theseecon o m i c c o n d i t i o n sa n d e c o nomic policiesremain basicallv sound dt'spite the crisis. Ilather the crisis could have beenavoidcclif not for the errors in managementof thc -

'l'he

Finanee

clecidedto do the dc'valuing (afterall, theMexicanscoined 'tnacho"). ,lsion utuntries lhe ierm 2.Tofurthershon,his"mamust be the mosl chismo," tlrcMexicanFinarrce prudenl und mosl Mirister decidedto deualue repont;ihb of men. tttithout thenecessaryback-up reser"es,The kev to successfullv devaluinga currencvis M e r i c a n F i n a n c eM i n i s i e r . the ability to say that ive dc Basedon nt.rvsrcportsasrvell r,alue bv 12'il and onlv bv as from talks r^,'itha visiting l2"r. If rvecannotb.rckthisr.rp professorwho is con\,ersant tht'n thc pcsobccomcssubjcct rvith the inner rvorkingsof the t0 attackbv the speculators. Mexican government,wc The speculatorscan be dehavcpiccedtogetherthe series terredonlv bv a massiveshow ol managemcnterrors com- o f f o r c e , i . r . . m o n e t a r v r e -

trIinislersof

In thc particularcaseof this FinanceMinister,he assurtd thc foreignbusinesscommunitv thatthcrcl'ould be. Nat urallr', tolrer the dexaluation u,asnntouncedtheforeigt inustors lelt betrayed.Moreover,thev could now no lonp;cr relv on his $'ord that the devaluationn oultl onh'be 12li. '1.Har,ilg antagonized the foreignbusinesscommunitv in Mexicir, tlrc FinnnceMinister then assuredthc detastotio of the Mericqn ecouontrl by refusirtgto talk to the foreign bond ond stock brokers

trading itt Metican bonrls (tesobonos)or inresting in Mcxicsn stocks (Telefonesde Mefico) to at leastexplairrthe actionsof the Mexicangor.ern ment. Treasurersof private companitsroutinclvdo so as thesebrokers are like a herd ofclcphants.Whenthevsiam pede,they cmsh elervthing in ihtir r,ake. The MexicanFi nanceMinister choset0 throw a firebombin theirmidst. lVhat is cvcn more amazing about theseblunders is t h a t t h e v \ \ ' e r ec o m m i t t e d over a period of onlv 17 days from his formal takeoverto his u u c e r e m o n i o u sf i r i n g b v a panic-strickenPrcsident.On s e c o n c lt h o u g h t , i f N i c k L e e s o n ,t r B a r i n g s t r a d e r , couJclsinglehandedlydestroy a ventrablcBritishmerchant bank over a shori period of trvo l'eeks, a FinanceMinis tct eYen one with less machismo and more prudence, candestrova vibrant economv bv a singleact. Basedon tireforegoing,we rvould therefore.rdVisethat the best \\'aV to prevent thc Verican Crisisfrom adversely atfectingihe Asianeconomies is b strcssthat FinanceMin i s t e r so r S e c r e t a r i e os f t h e Asian countriesmust be the most pruclcnt and most rcponsibleof men. While being rveli versedin economics, thev must also be highlv ef' fectir,ernanagersrvho carefullv implementrvell-thought o u t e c o n o m i cd c v e l o p m e n t plans.Thev must cautiouslv craft contingent programs to dealwith all eventualities,and must alreadyhave beensuccessfulin managingihe sudden crisesthat unfortunatelv no\r crupt unexpectedlvin this global economy. P r 1 ) lf l l l / , r r J . L l l i : : r t l i s t h . L t r l r , r , , i , r t i ) , li ) d f i n r f , , i E r r r l r l . sM i fi ,r{f rr,,J1.I /f t'.1 itli:fs i,r rrnrt.trrrt, fi r , r , r 1 1l., ! l l ! l r r t su t . 1 i t u l | \ t n l d t l u b l t l f r ' / Jr, r ' ! . 1 1f , . n r r t , l 1 ' . i r n , f l r r r , r J i l , r i.,rj,Jl1 l..f .i ilrf D.r.l.lrrr' t,\tnrn{. , t t r t P n i l h i l I t D M l ) )l t u l t l l n .

MAY1995. Tr{EAsrA\ MAN^CER APRrr-

AIM

EXECUTIVE DEVELoPMENT PRoGRAMS BRINGTOGETHER EXECUTIVES FROMNOTONLYASIABUTOTHER PARTSOF THEWORLD,PROVIDING PARTICIPANTS AN OPPORTUNITY TO INTERACT WITHPEERSFROMOTHERCOUNTRIES, GLOBALIZING PERSPECTIVES ANDVALUABLE INSIGHTS INTOMANAGEMENT PRACTICES ANDBUSINESS CULTURES. AIM-EDP wishesto announceits programffirings for therestof 1995. TOP MANAGEMENT PROGRAM May 15 to |une 9,1995,SheratonNusa Indah Resort,Bali, Indonesia MANAGEMENT

DEVELOPMENT PROGRAM May 22 to July 1.4,1995 October16 to December8.7995

BASIC

ADVANCED

MANAGEMENT PROGRAM 3 to 28,7995 July September4to29,7995 November6 to December7.1995 BANK MANAGEMENT August 28 to October6,1995

PROGRAM

MANUFACTURING MANAGEMENT August 14 to September7,1995 MARKETING

STRATEGY July 3 to 28,7995

COURSE

For further information on theseprograms, pleasewrite or call: ASIAN ,{'A ItqS.J'nU.1n OF e-" t

Mexrciu-ryrQ9 @

Executiwe Deweloprnent Prograrns Asian Institute of Managernent

3:flj*?,Tff'J:,ffiffli;t^-0,,

MCPOBbx 2095o1123PlseodiRoxas City of Makati, Metro Manila, Philippines Tel Nos: (632)892-4017to25,892-3260 Fax Nos: rc32\ 817-9240.892-3260

is merby o leoding o&ice on corporotefinqnce. ofbrs soundinvestment the requirements o[ inveslorond inveslee.Whetherin ioint venfurci, underwriting,mergersond ocquisitions privole xements,securities ond roge. stockbroke All AsioCopibl providesthotvilrrlleod thotcouldreolizeo client'spresencein this port of fie Pocific.Thisit ochievesthroughits foreignportneisthot lendtheir lrends.Throuqhits locoloortnerswho ore expertiseon qlobol investment ind.rskies.Providingo nevo* of o.Lno-l"dge-dleodersin their respective oooorlunitiesin the lieldsb[ industriolchemicolsqnd deterqentohosohotes, iritegrotedtextiles,[iber ond [ilomentspinning,cementmon'ufo.tur",'po*", distribution,countrysidebonking,.bulkseoond lond tronspoa,ogribusiness, ond lhe mqnogement ol the country'slorgestpensionfund,lo nomeq few. Togelhertheyserveos solid linksthotoptimizebusiness complemenlotion. Eyeingopporlunilies. Thinkingprotits. All Asiqcqpibl.Yourprolitlinkto Philippine business.

FOREIGN InlernotionolFinonc.

Rocletellr & Co. (ForEostl Koreo l,r{crchonl Sonlino G Sonyo 5ec'rrili6 Co., td. oI Yasudoond PomoLtd.olJoDon :

All AsiaCapital

All AsioCopilolCenler, 105 Po3eode Rox6i, Moloi I200, M.M. Phik. T . l . N " . 8 1 8 - 3 2 1I T â&#x201A;Ź l e xN o . l 4 8 l 4 A S I A L CP SF o c s i m i l(e6 3 2 )8 1 7 - 1 7 2 8 Cebu Office: Ground Floor.aboitiz Bldg. Archbirhop ReyesAve., Bonilod,Cebu Cii/ i l e{ 6 3 J{ 3 2 13 l l - 7 1 0 T e l .N o r . 3 l l - 7 1 | t o l 5 F o c s i m

PHILIPPINE SHAREHOLDERS: Chernphil/Gorcio Group MoniloBoyl1onco Group Relnemenl & Sâ&#x201A;ŹporolionBcrrclib Cepolco/Aboyo Group LondBonkol thePfrillpplner Alsons/AlcontoroGroirp