The Asian Manager, March 1997 Issue

SPECIALDOUBLEISSUE

".**'*.'fi{rA SIAN

M A B C H- A P R I L/ M A Y- J U N E 1 9 9 7

I\4'"-&' I{AGER

SAIM BOARD OF TRUSTEES

BOARD OF GOVERNORS SlCip, rorzder. The SGV Group fiiifitasU*wasUneton & CEO Mr. Jos€L. Cuisia;Jr.,-Presldaf Philanilife Insurance Company

ldlcchrtrnen

Mlslln Aushalir Dr. BIian w Scott, Ciairmdn Management Frontiets Pty. Ltd.

B!o- Andrew Gonzalez, F.s.C., prcsident De La SaUeUniversity Fr. Bienvenido n N€br€s, S.l. Prcsident Ateneo de Manila Univ€rsity

Brunei Daru38alam Mt. lirI'othv Or.'', Mtnatin{ Dir.ctu National In'suran:ceCoripant Berhad

M.hbeE

C.nrda Mr. Cedric E. Ritchie, O.C. Caryoftte Dircclor, Fomet Chaiffian and CEO Tte Bank of Nova Scotia HonrLonc Dr. TIle H6n. David K.P U Deputu Chaitvn and CEO Ttie Banl of EaEtAsia, Ltd. Mt. Ia.* Tans' Pftsidenl Tristate Holdings Ltd

IaDan Mr. Reijiro Hattori, Chrimaa S€ilo Co. Ltd. Mr. Yotato Kobayashi, CilirmaTt Fuii-Xerox Co. Lid. Malawi.

Tan Sii Dato' Dr. Lin See-van,Charntn ond CEO Pacific Bank Bhd. Tansri Dato'S€riAhrnad Sarii BinAbdul Hamid Cruinrrn, Permodalan Nasioial Bhd. Philippin€6 Mr. C&tee Tv, Chaift&n and CEO MetropolitariBan k & Trust Company Mr Aidr€s Soriano III Chaiman ol ttu Boa a CEO SanMiguel Corporation Republic of Chim Hoi. w.ne Chien-Shjen, I"$llafor LesislativaYqanof R€publiaof China Mr:Stan Shih, Crrirtu; tnd CEO The Acer Group SinrrDore MrBiicn Yoon Chians, Chahlan antl Manaeine Di..rol, Iadine Math-eson(Singapor€) Ltd Mr. Lua Chenq Enq, D?rtrN" chtiivn a CEO Neptune orieit Li-nes South Kor€a Mr. Pvonq-Hwoi Koo, Crt itt n Lucki-Goldstar lnternationalCorp and th€ Kord lnternational tade Associahon Dr. Duk4hoone Kim, Erecuti:teAunselor Daewoo Compint Ltd. Th.ll.nd Mr. Vimi Phutrakul, E*cutiLv Chabman Boonravid Asia Co. Ltd. Dr. Amnuav Viravan, Depulr Prine Minisler covemmeit of Thailand

U.K.

Mr. David K. Newbiqsinq,- Cr@irn t EquitasHoldings, Lid

Vietnrm Dr. Vo Tong Xuan Vi.e Drectbr Can Tho Univ€rsily

Mr. Manuel M. lrDez, Prusid€tt Manila Electric Coinpany Mr. EduardoL. David, Rerotul Mau?n9 Dircctor Hambrecht and Quist AsE Pacific Umi6d A;b. Ramon v del Rosario,St., Clunnan ol the Boald, The PHINMA GrouP Mr. 106€S. Sandeias,Clt tflsn and Ptesid.rtt Ptofessional ManaSers, Inc,

Mr. Cesar A. Bumav€ntura, SeniorPartner Buenaventura, Filamof, Echauz Law Offices

Mr t /ilfrido C. T€.son, yice Chairrun ol th. Board Equitable Banlint Corporation

Ms. Ma. TeresaColavco, yice Pttsident 'fol Adrninish:ationand Coryonte Secfttary Manila Cordag€ Company

Mr laime Aucusto Zobel de Avala IL Pr?siderta'rd CEO, Avala Corebration CaeoBtdlqAiE Attv. EduardoB. Cudala,Parhsr Beipzon, Zarasa, Narcbo, Cudala, Pecaon, Benison and li.ienez Law offices

FEDERATION OF ASIAN INSTITUTE OF MANACEMENT ALUMNI ASSOCIATIONS

tndone3i.

Drs. Rachmat Saleh, PresfulentCommissioer Bank Muamalat Mt. Harom Al Rasiid Chaiman of tht Boald of Comnissioners P.T.Caltex Pacific IndoneEia

Mf. William S. AndeEon , Retrcd Chtiinn Boald , NCR Coipoiation Mr. Ma* B. Fular, CEO Monitor Company

Dr. Patricra B. Licuanan, A.adcmi vice Preslent Ateneo de Manila University

Mr. Felip€ B. Alfonso, Pt?sidenlend CEO Asian Institute of Management

Bro. Rolando Dizo& F.S.C.,Prcsidetl University of St. La SaleBacolod

Indt Dr. Iasdish Pari-kh, l&ursins Direclor lft a;d Muirhead (lndiJ Pvt. Ltd. Mt, R^tan Tala, Chiirnan Tata Industries, Ltd.

u.s-4.

Chrinen Mr. washington Sycip, Fo!flder, The SGV GrouP & cEo Mr. JoseL. Cuisia;1r.,?/esidenl PhilamliJe Insurance Company

oJthe

B:nclad€3h Mr. Flilon B. Paul, MM'88 Deputy Chief Ex€cutive Failili PlanninPS€wicesand Trainiis Center103,N€-w Circular Road Dhaka 1217,Bangladesh Tel.: (880-2)505010 Fax. l88GD 867637

P.kfut n Mr. IshtiaqAhmad Qurcshl,BMP'n General Manager Industrial R€lalions Department Pakbtan Intemational Airlines PIA Head Office, PIA Buildins Quaid-€-Azam International AirPort Kamchi 75200,Palistan Tel/9221) 45n$$ /4959W7 Fax : \9221) n2n27 / 4570419

Honr Konr '76 Mr gteDhei Tanc wins On, MBM Dir€ctoi Financial T€lecom Limited 1205China Re6ourcesBuildins 26 Harbour Road, Hone- KondTel.: (852) 28680668 Fax: (85D 28n5021 E-mail stang@fint€I.com

PhiliDDines A. xerez-8urgos,MBM'71 Mr. A'Ik Pr€sident Land Co. hc. zeta ll Bid8.,19l srlcedo str€et,Makati city PhiliDDines Tel.:t632)8189130/8921571 Fax : (632)8189130

India Mr. lu2ar Khorakiwala , MBM'75 Executive Directol wockllardt Limited Readymonev Terrace, 2nd Floor 167 dr. Annie B€sant Road Bombav 400018,India 'tel.: g12D 49(4422/ 4951rr5 Fax : ..9122)4951137 E-mail bbyaim.alumni@axcess.net.in IndonG3i.

Mr. Leonard Tanubrata, MBM'78 Chairman FAIMAA Indonesia Chapter FAIMAA Se.retariat Office Rm. 254, Sahid laya Hotel & Tower JalanSudirman86,Jakarta,Indonesia 7e]^:1622115702ms Fax | (6221')5702306 E-mail jkti€p@aim,edu.ph NGpel '95 Mr. Bimal Chaeacain,MDM AIM Alumni Asftarion - N€pal GPO Box 11918,Kathm.ndu,Nepal ' Teli Onl) 471583/474740 Fax: (9n11 415n9 E-mail asuka@casnovattmail.com Korea Mr. Chun lin Suk, MBM'79 Execntive Vice President Hana Bank 101-1,1-Ka,Eulji-ro Chuns-Ku, S€oul, Korea 7el: t82-2')7547215 Fax : (82-D n(4770 MaLwia Tan sri Dat6lr. TalhaHaji Mohd. Hashim, MM'76 Chairman KelabAsian Instituteof ManaE€ment-Malay6ia SuiteE, 20lF, BansunanAnqk;sarava talanAmDanc,50:[50Kualalumpui', Malavs'. \et. <603i244105 /24498fo / 2414n Fax. ($3) 2',41696 Rep Office E-hail: ahmadz@poP4.jarint.my

Sinc.pote ' Mr.CenCheong Eng, MBM 82 President AIM Alumni of Sinsapore - 20 Kramat Lane f02{4 United House Sinsapore912412 lel: (ars)7371"94 Fax: (65) 737195 Tatwan Mr. ChristopherL'n Jih Fung, BMP'7 Exc€ll€nce Publications Companv 1/F, No.17, tan€ 3, kion I Chien Kuo North Road, Taip€i Taiwan,R.O.C. Tel.: (886-2)509?,506/5093578 Fax | 1886D 51n607 Thril.nd Ms. Pomtie lyimapun, MBM 92 RA Adv€-rtisina ohailand) Ltd. 59/387-388 Ho;ne Place SukhaDiban 3 Road , Sapansoong Bungkum Bansk'ok 10240,Thaihna 72802tn 1e1.11662t Far (562)728021G1l E-mail: m.ktipra@.omnet.l.sr.net th

u.s.A.

Mr. Roben V Chandran, MBM 74 hesident Chemoil Corporation EmbaKadefd Centet, Suite 1800 San Francis.o, CA 94111

u.s.A.

extension235 Tet.r(415)2682700 Fax: (415)26827001 E-mail Rvc@chemoilcom

AIM

SocialCapital andthe Poet'sTree

THEASIANMANAGER publishedbi-monthly, e x c e p iro r r v r oj s s u e c! o m b . n e ,dn t o o r e i n MarchJune,by the Asianinstituteof Management.IMITA(P)196,/t0,/S5KDNpp(Sl1076,/ hen AIM'Smanagement gurus Ned Roberto remindsus to tap into the 3,/93ISSN0l 16-77901 Editoriat and Adverrisdabble poeLry, into subtletymust memoies olbryerlJandtradersin competitjve ing Oifice:AsianInstituteof Management, 123 research. be the Socialcapitalstock, message.

In this double benchmarking Paseode Roxas,MakatiCity,philjppjnes.

Telj after all, issue tends on t0 China be self,reinforcing andJapanwherewe look at and 1632)892 401| 251892 0435Bj B%334t Faxl socialcapitalin the contextof structureand cumulatlve, shaddlingbetweenstructureand 1632)817 9240.

culture, Caby Mendozaselects of"nurture" Markham's culture,presentnganimperative classic verses to shareinsjghts research abouttheASEAN asthe AIM familycorporations ream manager of the future;Ed Morato composes led by Titong Gavino, Canbena's Ftances haikusandtankasto getat theoriginsofrising Miley and Andrew Read, and people's Japan;ReneDomingopondersTOM pitfalls Universiryof Chinas Li Jianfengfoundwhen CopyrignroloaT 7tu AsianManaget.Alt plrs theyexaminedtiestharbind. of Asiancompanies andJackandJitt, Nafis reserved.

Reproduction in anymannef in wnote preludes How does this all translate to yaur Silos pamdjgm shiftsin managemenr or in part in Engljshor otherlanguages wmout needs at the workplace? of organizations by taking Lhepathof wen hua, pnol wrrtten permissionprohjbited.prjntedby i n c o n t r a s t r o t h e G r p e kp a e t i A c , i n limes PrintersPte.Ltd.,Singapore approaching ConftjcianChina.

Editortal Board: Poetryis povertywithout "v,-rne Chaiman:.lesusG. Callegos, venom. poPoety is visionand cornucopja.

Jr; Members:ReneL Domingo.

Vi(lor5. I imltngaa. etly captures thepoisonthatcomeswith pov_ Patricia L.Lontoc,Eduardo A. Moratd,AshokK. Narh ertyof resources andposesthe remedyof col lectiveaction.Forsocialcapitalis aboursponEditorial DepartDent: taneous collective cooperation referring to ,,fea_ Editorln-ChiefrPatriciaL. Lontoc; turesofsocialorganization suchashust,tlorms, ManagingEditor: Ma. Teresita Martin,palo jmpfo\e tneelficien(y dnd neMorkr tiat can AssociateEdito.: JudithAngelaE. Alpay; of societyby facilitating coordinated actions" ContributingEditor: Rjcardo A. Lim; RerearchandhodudionAssistant AmyG. Esprnru (RobertPutnamMaking DemocrucyWotk, (ap.lal.u.timdrely, lsa3)Social is producdve, Business Departmentl likephysicalcapital.WanyingWarlgpointsout Publisher:FelipeB. Alfonso; Reforms Caohai's andcompetitiveness communitybasedsuategy havemeant for conser.

Co-PublisheriPatdciaL. Lontoc; vationis,at core,,luzru helpingeachother. rightsizingandbeinglaidoff. No oneeverpromDirectof for Operations:Millie C. Fe.rer; isedindlvidualprosperity Yet,poverty,too,js poetrywjth ,.v"-the witlt collective pros Marketing Offcer..Marjodey poblador; vjgor Povertyis missionand Utopia.povelry periryAll we know is, asphysical,real capital Advertising AssistanL Vanessa M. jaballas; drivesglobalcompedtiveness socialcapitalincreases. with clearmeas- diminishes, CirculationAssistantiEdenS.Cafdenas Structute,cultureand nurturemay still urabletargets.Socialcapitat-building is about "brave reciprocity" soiution.David to overcdme collectiveac- getusto therootsofa practical Media RepEsentative Offi ces: tion probiems (EijnorOstron, 1995World Noe\ in Healingthe r/ounds(1993)shows Philippines:Deliacurjeftez,1632)894 4BOq; BankConfefence).

And so, president Fidel how peoplehaveovercomelay-offtraumas AlumniAisocjation of AIM, Inc.,{632)893 7408 V. Ramosunde$colessociaiinvestments Hong Kong: Pamela Choy,(8521834 5980 for through a diffuse rcot (vercus taprcot) Singapore:TeddyTan,(65) 440 8760 intellectual mostneedsaremet externally capjtafbuilding; AIM Governor s ategy,whete lndonesia:RamaSlamet,(6n1) 799 2090,79237M Tan Sri Dato Dt Lin See yan posesleader Iathertian internallyby rhe firm. Suruvors Malaysla:ConnieNg, (603)7t7 S37O s h i p c h a l l e n g e sf o r k n o w l e d g e - b a s e dhavelearnedto spreadout anddeepensocial India Sub-ContinentMediaSouthAsia(p)Lrd., workforce;Asian DevelopmentBank Ex- foots.So.how haveyou beengrowinglhe t9771)227336 ecutive Director for China Li Ruogustresses Poet'sTreeiately?

Pakistan:S.l.Salahuddir,, "getting 19221)5682271 rich together",fof fte benefitsof rekrea: Y K. Chun,1021738-7970 form mustgo to the people,,.thebasisof re Japan:TokujiNiinuma,(813135829104 formandfiom whomsupportcancome" Thailand:Dr AnrhonySharma, (66213319303 While Maryee Celi highlightsrolesof Unlted Kingdom:BrjanTaplinAssoc.(0442)246034 C h i n aa n d I a p a nj n r e g i o n ael c o n o m i c FrancerSrâ&#x201A;Źphane de Râ&#x201A;Źmusat, (331)39896341 cooperationand Frankie Roman and AssociafeDeanLonlocleachespublic administrahon,andinternational relations andIT in MBM, Marianne Carandangsuggestwaysto sustain CDM and MDP. Philippine boom;international mafketing guru hlterfietAddress:<plontoc@aim.eilu.ph>.

In te met Address : tam@ai m. edu. p tL Selections lTom past and curent hsues Iound in http:,/ /tyvwraaim. edu. ph.

4-t*rfr

March-April/May-rune l9g7

The AsianManaser

3

fiwr-pisiX$tE*

TF{EASIAN

A/IANAGER

A/IANAGER vol. x,Nos.2'3

MARCH APRIL/ MAY-JUNE19S7

SocialInvestmentsfor Global Competitiveness

by H.E. Fidel V Ramos,Presidentof the Philippines Review and Prospectsof ChineseEconomicReform Bank Li Ruogu,AsianDevelopment byProfessor

46

AIM Atumni Interviewi Doing BusinessIn China

44

Industry The LeadershipChallengein a Knowledge-Based Pacirtc Bank Yan,

by TanS DatoDr. Lin See

40

TheASEANManagerof the Future AIM A. Mendoza, bvDeanGabino

Journeyto the RisingSun A. Monto, Jr, AIM Eduardo byProfessor

57

Intemational Dav at AIM

PBECPondersChinaandJapan bvMarueeCeli.AIM SRF

27

Issuesin ManagingFamily Corporations

by Professors Jacinto Gavino,Jt:, FranciscoL. Roman,Ir, MatianoS. Lagman,DeniseM. LopezandMariviB. Auintos,AIM with Ma anneC. Carandang

ll

Intemal Controls in OverseasChineseFamily Companies byProfessorsFrancesMiley and Andrew Read, Universityof Canberra

t9

Community-BasedSffategyfor Conservationof Caohai 'Q6

by WanyingWang,MDM

p.57

4

TheAsianManager March-April/May-June1997

To Influence Management Thought andPracticein Asia

CONTRIBUTORS T H I SD O U B L E ISSUE

,,,, a.siK'!#KTtStr]l u', o,0,,,,, u '.

Preview:The ConfucianTao byProJessor Leonardo R Silos,AIM View:CompetitiveBenchmarking Research and the MarketingMix Decisionfor an Existingproduct byProfessor EduardoL. Roberto, AIM

69

FinalWake-upCall: Reformor perish ,Ouality Review of Professor ReneT.Domingo's MeansSurvival, byProfessor SonnyColoma,AlM SUP(e)R Memories:SourcesandUsesof power Interview fora Bookproiectof Captain Roberto H. Lim,AIM

PolicyForum:Sustaining the Boom byProfessor Francisco L. Roman, Jr.,AIM andMaianneC. Carandang Management Ethics:Management ValuesandEthical Behavior:Crosscultural Implicationsfor Business byProfessor Li Jianfeng, PeoptebIlniversityof China

86

Management Update:ApplyingManagement Frameworks to FamilyCor?orations Management byProfessors Francisco L. Roman, Jr andMariviB. Ouintos, AtM Casein Point JointVentureMisadventure?

95 byLaamiS.Baluyot,MBM '97 WithComments fromprofessors EtsuInaba andMarioAntonioG.Lopez, AIM andTonyGoKianLuv,MBM ,Z3 Enffepreneur's Corner:How to ManageCompetition byRobertV Chandran, MBM '24

gz

March-Apdl,/May-June 1997

TheAsianManaper

5

ApplytngManagement Frameworksto FamilyCorporations Management tttebetertohseaseFAMcoRsllsbimbiliu SomeExamplesin FamilYFirms

supplie$,(4) the threatsof entry by new' Three Basic Models thesonusedto In onesuchexamPle, comers,and(5) threabof substitutes.

Corporathe Family of obiecuve The andauditing the accounting of be head version a modified Exhibit1 applies Proiectis to developframe' tion Research in however experience His deDartrnent. a family for Model s'Forces Porter works that increasethe undeNtandingof of the So the was limited. of funds sourcins family dnamics as they impacton t]le firm. to famcordecidedto hire a prcfessional of ri' instead model, modifled In the plospective framev/orks business.The departpafi finance of the this over take indus' the shouldbe more than desdiptive;they valry amongcompanieswithin ment. Asit tumedout, the professional must be prescriptivein order to provide trv. the focusis on rivalry l4??in the firm wasProficientnot only in manaqer that may reducethe amonscritical forces. recommendations fundsbutalsoinand one force- the threatof sourci-ig managing C-onsider failurerate of family corpolauonsand t0 sysrcms management of a number famstalled beyondthe enty, which maylnvolveimmediate increasetheir sustainability the efficiency considerably that improved personnel, or as' non{amily lly membe$, ttrird qeneration. "relations". of of theiccountingandauditingsystems sci' sortedafflliated fromthe behavioral Fiameworks the constemadon to much a founderwho hasbeen thecompany, Forexample, tend to be powerencesandpsychoiogy son. alonefor sometime' of the business the runninq prescdption' on short but ful in description "Relations" in-laws, includecousins, is suddenly decisions of a tendencyto en on maKneall maior "family". because Dossibly become now have who friends an with or daughter son i'ith a faced On the otherhand, ihe sidi of neutrality. andmovesinto expands business flameworKarebestasple- MBA, wantingto implementnew ideas. Asthe manasement generafons' thereare and third the second questlon as scriprions,in part becausethe primary His positionis suddenlyin to be expect that members family more new of this given enfy the andCEOSareprac' well ashisrole of managers audience thatthebusiness "rules'of- familymember.

Assuming supported. titioners,and seekapplicable thesefamilymemThreatsof enuy would alsoaPPIYto pr6wsconespondingly, thumb". benentftomthe also to erpect Sers mav This paperappliesthee well known siblinss:an eldestsonwho is expectedto Thiscanbea uusiness. l'irnity of ihe fruits with faced ftamework on familycorpo- be thJ succesorandsuddenly manaqement (it a becomes family the both to threat or as talented who is or sistel Austin'sPolicy a brother ration-s- Porter's5-Forces, busito the oI of conflict) maiorsource moretalentedthanhe is.

ImpactModel, and the Planning-Otganiz- Dossiblv relationsarenot reneis(if theextended (NFMs) who are members Non-family ing-Contolling sequence. "professionalize' onworkingwith y insist but a cbmpetent the usuallybroughtin to comPanY). geDerate the pose and a threat can business s-Forcesin Family CorPorations Porier consideredthreats of MiahaelPolterdevelopedthe well- either constructiveoI destuctive rivalry in termsof ploductsor substitutes the known framework for industy analysis within the famcor. The theat lies in for the famcor'the However, Drocesses. often is (l ) rivalryamongcom' role of the professionalwho whichemphasizes the Peoplein the on is alwaYs iocus an expeluse for business paniesasthe keyforcewithin an indusuy broughtinto the the Boardof famcor, Fora competivenessand in- thatnoneof the familYmembersarepro' orqanization. which generates It is true area. threat key is the tlreat Diiectors anevengreater novation,Ieadingto gtowthanduldmately, ficientin.ltbecomes oftena is board famcor typical the that greater his than Drofitabilitv.Other corollaryforcesaffect' if theNFM'scontributionis consisting the family, to aDDendage Dassive may talents and whose area ins the healthof the industryarethe bar- or herexDected "heir". tothefounder brtovattiiinossympathetic gainingpowerbetween(2)buyersald (3) evensumassthoseof the ruling I

ManagerI March'Aprtl,/May'Junel997 TheAsian

or other family members.

Nevertheless, conflictscar occur when the founder'sgrip weakens.

For a family firm where once the ownerswereall little children or a wife abidingto her stonger husband's wiil, conflictmayaise when the children$ow up and startdemandingmoreinvolvement in the business.

At its worst,this could lead to a legalbattle where thechildreninsiston theirrightof involvementas membersof the board.Moreoftenthannot,however,theconflictis handledwithin the familyby strainedrelationsand deep-seated huts affectinsboththe familyandthe business.

Another variation of board conflictwouldbe betweenthe externaldirectors andboardprofessionalmanagers.

Thesetwo t'?es are usuallyinvited to be board membersto add"credibility"to the

the opportunitieswithin their scopeofinterests.Aslongasthe fatherwasaroundto mediateand decidewhich 'expansion"was thepriority,thepeaceamongthe brotherswas held. This was mainlybecause of their "respect' for their father. The father'smajor concemhowevetwaswhat would happenoncehe was no longeraroundto makethe deci sions. Would the brothersre" specteachotherenoughto listen and makedecisions for the goodof the conglomerate?

Or would eachone be concerned with ontyhis own "turf" ? The evenbiggerquestionwas who would the foundereventually chooseto succeed him asoverall chairmanof the boardfor the conglomerate?

Finally,therearedifferences in values andsrylesbetweenpto_ operauons ofthefamilyfirm.Theseexter- determines emotional matuityandhea.lth fessionals and nonprofessionals, be they naldirecto$. andboardprofessionals are toa famifyanOtfrelusineii Indeed, con. family or nonfamily members.ihe label respected in the flictis oftena catarysi ioiiirange;oenia of "professional" oftengenerates H:,1y":-.llg::land conflicts, Duslness communrty, rn theirrespectiveofconflict orresistance to change, onthe negofiations, relationshifts. thislalhuon orhel hano,,;t-;; ffing ou.,*.

Riva.lry occurswhennew familymem1,.]9'.11^,:9,::yj::.--rl-is tocapitalize on'in problems into the next Derscomein with differentvaluesand senera' il:"li'Jir?:'l-*es leos;]ved stylesftom thoseof the foulders. One It is importanthowever, thattherelaForexarnple, the founderin the nrst examplewouldbe if the valueplacedon tionshipof theseextemaldirectorsand generadonmust eshblish "family'lor negotiareJ meaningpurrjngftmily first boardprofessionals becleatftom thesun. the relationshipwith a son or diughter {oftenfoundin thepaternalisric cultureof Ouite often, however,thereare different wantingto tale over.This happens when familybusiness) is no longer upheld bythe expectations andhence,conflictarises.If childrencomeof ageand thetfeel that it secondol third generation family mem, the founderexpectsthe extemaldirecror is time their fatherhand over the reinsof bers. Ouiteoften,childrenor grandchilto lendonly his namewhile the direcbr thebusiness ro them.Thiscanbea major dren,especially if educated in the West, expectsto be a "managing"or involved sourceof conflictfor family membe$es- lookfor competency instead of bloodties directolthis canbecomea majorsouce peciallyif rhenew generadon takingover in their manage$.Thiscreates a shiftin of conflict.,Thisis pafticularlytue if the lwnemersecondtal(ing overfirstsor third valuesand is often a sourceof conflict founderhasa differentstyleof managing takingover the secondl had manvnew within the famcor. fiom theideasofthe externaldirector and ideasthatthefoundet or headis reirsram Anothervadationarevalues boardprofessional.

Again,the exffeme to. It canalsostarta plocessthatcoversa introduced professionalandsrytes by managers. wouldresultin a legalbattle. pnenomenon knownas,,founders' pain', Whenthefamcor's growri is muchlirger A lesservariationofthiswouldbemi - which happenswhen thepa0iarch of the than the numberof familymembeis, noritjesandproxies.Conflicrwoujdarise business is not readyto let go. Thishap- sooneror laterwe seetheentryof theproif t}lepersonsconcernedhayediffercntex- pensfairlyoftensince so mJchof the fa. fessional manager.The levelof enw of pectations.In the caseof minoritiesand ther/founderis dedup with thebusiness the professional will dictatehis influence proxieshowever,the threatis lesssince thathe started. within the famcor If hismanagement "oversryte they can be ruled" by the restof Horizontaldvalry can occur when anovdue systemare verydiffelentftom the boardfamilymembers.Still, the re. two 0r morechildrenheadins differentdi_ that of the founder/family, thisbecomes sultinghurt feelingsand badbloodcould visjonswithin a firm or mo companies a maiorsourceof rivalryandconflict. havebeenavoidedif expectations were within a conglomerate vie for limiiedre. darinedfiom the start. sourcessuchasmoneyor peoplefor ex- The Austin Model in FAMCORs Generational rivalry is anotherele- panson. ln one suchcase,therewere Thedlatamics of Polter'ss-Forces on mentinfluencingthe healthof the famcor. threesons,allequallycapable, equallyedu- the familyfiIm requilesoptionsfor actlon.

Shiftsin bargainingpowerwithin the flrm caredandequallytalented.

Thefatherdi- Anotler management model,by James will resultin negotiatedconflictsandshift- vided the operationsof his conglomerate Austinis basedon business,governmenr ing relationships.

Noterhatrhedynamics betweenthe threesonsandall thiee made relations andtheresponse of anindividual of a familydemanda ceraindegei of con- gooduseof thecompanies givenro them. firm to a parucularissueaffectinsit. structiveconflict.Lackof conflictis not a Theproblemarosebecause a]lsonswanted _ Exhibit2 presenbrhe appliiarionof measure of a successful family.Rather,it further resoufcesto expandtheir respec- the Ausdnmodelto the familvfirm. fol. is a family'sability to manageconflictthat tiveempiresin orderto take advanbg;of lowingftomthemodified,Porters-Forces EXH|aITI THEPORIER RIVALRYIOOEL APPLIEOTO FAUILYCORPORATIOI{S

March-April,/May-June 1997 | TheAsianMana.ser

9

EXHIBIT2 ADAPTINGTHE AUSTINMODEL TO STRATEGICAPPROACHES FOR FAMILYCORPORATIONS

M P

o R T N

c LOW +HIGH POWER

model.Thus,issuesrelatingto the ele' mentsof rivalry withln t\e firm forcea choicefor the individual,whetier profes sionalor not,whethelfamilymemberor n0t.

Lhatif theissueis Exhibit2 suggests veryimportantto the individualbut that personmaynot havesufficientpowerto prevail,e.g.,whenheor shefacesa strong founder,thenan allianceis calledfor.On the otherhand,if the issueis important, and the individualhaspower,for exam' ple, when a youngersiblingalonepos' the technicalknow-how,or has sesses within thefirm hisoperation uanslormed fortherest cashgenerator intoanessential "attack then an of the family business, mode"mustbecarriedwithouthesitation.

Forthe famco!the attackmayconsistof "rulesof the game";in the alteringthe the firstbornsonis preceding example. heir,but the designated taditionallythe morepowerfulyoungersiblingmaychoose to asserthimself.

An examplewouldbe a familycomTheyoungerson panybased in Singapore. favoritewhiie the father's wasconsidered the the elder,the originalpatriarch's, thegand' grardfather's.

On hisdeathbed, father1eftall his remainingsharesto his favodtegrandson(the elderl givinghim potentialcontlolof the companyat some the future time. As a furiousresponse, deal a realestale younger sonnegotiated millions.He whlcheamedthecompany did thishoweve!with hisfather'sbless' ing but without informinghis brother aboutanydetailsof the deal. Thissore resultedin anopenwar pointeventually thathadtheelderbrotherthrownout of Butnotforlong.Theoldef thecompany. brother,togetherwith two uncles,ral' to get himselfreinstated lied resources directorandhadhisyounger asmanaging 10

bfotherthrownout. Amidstall the theprofes' turmoilin theboardroom, wereexpected andemployees sionals as usual. But to carryout business the tensionin the officecouldbe slicedlike aknifeandeveryonewaited with batedbreathto seehow the youngersonwould regoup and re taliate.It wasonlya matterof time. describe Thenvoothersituations positionsof weaknessand indiffer' ence.Thus,if theissueis not particu' larlyimportant,but individualpower is high,thenthatPersonmaychoose to avoidconflictwithin the family cre byspinning-off, firm,forexample, unit,0r personatinganindependent If ality,if theindividualis concerned. arelow, bothpowerandimportance then the individualcan expressindiffertakinglhe on theissue, enceby acceding minority,bid positionof an acquiescent ing one'stimeuntil powershifts.

Variationsin Planning-OrganizingControllingin FAMCORS proc' thet)?icalmanagement Finally, in themodelof Planning' essis embodied a Organizing Controlling,representlng oper' standard thalhasbecome sequence atingprocedurefor non-familycorpora' i o n sT. h pP - O - C M o d eLl l x h i b i3Ll i s i n ' for strategyformula' tuitivelyappealing, First.vouplan, Uonandimplemenratjon. (humanand you resources organize then and finally,you controlyour otherwiseJ, thattheplanis imple to ensure resources mentedpr0pefly. difin familycorporations, However, oftenprevail,as follows; ferentsequences P-C-O The professional,MBA when first enteringthe family manager, a plan,but then findsthe executes firm, "control",throughamanneedto establish l M l s l ,b e a g e m e ni nt f o r m a t i osny s t e m needto obtainin causeof the manager's beforetryingto formationon thebusiness organlzeles0urces. is the domi' O-C-P Thissequence to an internalthreator nant response

The "Typlc.l"

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( PO.c or sâ&#x201A;Źâ&#x201A;Ź) Plannlng (8trablv)

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TheAsianManager Match-April/May'Junel997

organlzlng (Structurol

Cyclc

makermustflrst Thekeydecision change. contol,before thenreestablish reorganize, plans or strate$es. new any undertaking Forexampie,the deathof thefounderol re' Theimmediate uncertainry tencreates actionis oftenan attemptto assertcontrol, which maywork in the shortterm; in thelongterm,it maybreedresentment it was perceivedas an lnappro' because priateand "naked"showof force.The maybeto fust response moreappropdate "reorganize" or by by buiidingalliances, etc. isolatingotherelements, is the re' O-P-C This sequence sponseto an externaltirreat,usuallyre' flectingchangesin the market.A new competitol new technology,a possible mayall triggerthe pdodtyto ortakeover, ganizebeforeplanningor controlling.For maydemand example,externalchanges in the positionsof familymem' changes A familymember bersin thecorporation. in the R & D unit, may holdinga sinecure find himselfor herselfunableto suddenly the needfor new productdevelopmeet moves. a competitor's mentto counteract C-P-O Controlis the obviousre' to a crisisiparlof the ploblemis sponse definingwhen a true crisisemerges,as Forexamto threatsor changes. opposed who is by someone ple,rheascendance will gener' successor, not the designated ate a crisis.In this situation,the newly mustasse aurnorsuccessol undesignated re' ity throughcontrolof the appropdate s0urces. a crisismaybe cre' C-O-PSirnilatly, usualiybutnot necindividual, by an ated who is a o[ thefamilY. essarily a member minorityowner,e.9.,without 51% con' tlre doml' tlol, but who is, or represents, nantblock.

Conclusion displayunique Familycorporations and behavior problems, characteristics, patterns.

Thisarticleattemptsto showthe modelsfor family utility of management corporabons. ond petsonsi eritfiples Namesof corporations citedwercuilhhelduPontheil r.quesL f/d/,:'ot F/an(r.{uL. Ronan lt F lhc f\?,u lioe Directotol theAIM PolicvForrm lnlern?t <frdnkie<tnit.edu.Ph>.

Atldrcss: f rok'<orMn. vt<i n uarit'i B Quinto<i<o coret'acultymenberoltheMister in Managcm?nt Prognm atldpall oftht AIM FamcotResParch eduph> Ctoup.lilternetAddress:<1nbq@aim Group lnternet: Familv CorpofttliotlsResearch .ph>. <futncoftUinl?n

Issues in Managing FamilyCorporations Potential gateways to Asian growth, FAMCORsin Asia havetheir own life cycles andpsychological dynamicsto contendwith

Family corporations (FAMCoRs) powerfulandsuccessful.

Together with the sourceof signincant growthin Asia.part in Asia Overseas Chinese,thesebusiness family of this understanding wil alsohaveto As eariyastwentyyearsago,there groupsarecalled"AsiakRulingFamilies;' comefiom knowing what business and./ waslittle research that chronicled, much by Asiamoneyand"Asia'sCofuorate Dy- or familyvaluesdistinguish theAsianftom lessstudied,the riseof Asianfamilycor' nasties"by the Falta sternEconomicRe the weitern. one manitestationis the poradons(famcors) asan increasingly in' view, arrd,are alsofeaturedreguiarlyin Asianpresencein the governanceand fluentialeconomicand politicalforcein Asiaweel9TheEconomist,ano tn. Ma- management offamcorsifter several gen. the region.Earlyresearchon the topic rliladailyBusinessworld. erations,whereaswestemfamcorstend (Purcel1, 1965;Limlingan,1986)focused Thefamcorstartsasthe-seminal ef- to professionalize earlieranddeliberately on the Overseas Chinese, latertermedas fort of an entrepreneur who was able to havedecreasing say ' in the management "bam6oo the network,"thatconsisted of passdownhisoi hervisionand,,passion', in the companyi "the essential playersin all of Southeast for the familybusiness to ar reasroneor Asia,"namelyin Malaysia, Thailand,Sin- two generations downthe line.Oneend Definitions of FAMCOR gapore,Indonesia,and the Philippines of the famcorsspectrumconsistsof the in. O.f,ri." of famcorsis easy (Weidenbaum and Hughes,19S61.DBS Satimsof Indonesia,thp Sophonpanich *fr* i,..n'.i'i",fre largedlnastjes;for Bankvice'president andheadof economjc familyin Thailand,tie Ayala;in the phil. ;;;il;;;##s, thedetinitionis less research in Singapore Friedrich Wu proph- ippines,andsoon.Thesecorporalons are ctear.fne"Oennitions "Asian adopted by theAIM esied, groups,parricularly increasingly business professionat withintheirman.

(AIM croup Famcor d;;;;;# theOverseas Chinese, will becomean in, agement stucturesandprocesses oesplte t-'u] Crorrnlere:c fn|^.", creasingly eco- lamilyconbol.At theotrrr."o "i,rr. #.. limportant]tfansnarional :*"1:,t:11::t'

nomic rorce inrheroreseeable ruture.',l trum arethe.or-.no.ooo ,,.*'*T,li ,*.*"!;;iiltjrlllfilii}H[1"11i; GordonReddins(1993)of the university neverprogress of HongKongis currentlya majorauthor. ity on the subjectbut his literature also focuseson theseethnicchinesefamilies who have "relocated"to the Southeast Asiabutstillconsider themselves Chjnese.

Regardless that Asianfamilybusi nessempiresareprimarilyidentifiedwith theOverseas Chinese families,,otheinonchinesefamly goupsin Asiaareequalry

beyondiheir initial state.

In the middleare the buddingor estab. lished but increasinglyprofessional famcorswho arealsocontributingto the overallgrowthof the re$on.

Regardless of the famcortsizeand sophisticarion, understanding whatmik" tiese organizations successful and how they are ableto suruiveis the potentiat gatewayto harnessing and susnmng a

,'o or moreat some ;i;;ffi;;",i;,i1 lme 1yeiedirectlvinvolvedin the busi".i, '- fil.r*if.u r'rrr, ,qASf. is considered a fam. ;; #;;;; ily business whenit hasbeencloselyidentiheOwith at leasttwo generations of a f.n1,fy."j *iin tl.,ofi* i,., f,uO. 111rtualinfluenceon companypolicyandon ;;;,;;;il';ectiues ot the family fDonnelly,1g64].

March-April/May-June 1997 | The AsianManaper

ll

contlgurarron culturalconfiguration cultural Family :Patriarchal organization:paternalistic stamp : rubElglqqP rubber Board rarelycollaborative rarely :conflict, fam,ty :conflict, Family t-eaOerstrrptsuaesson Leadership/succession Oevetopment I Leaoen Oevelopment Z:erowtn.anO rwtn'ano anOoevetopment SageZ:erowtn Saoe .collaborative

LifeCycleStage Lifecyclestase Business staoe Staoe il:Creatino : Creati-no " theBusrness

gage3:Succession NeNext rlext rcession tothe to Generation

Mainlssues l{ainlssues survival Survival

iil#:":ll;lll"'# till" iJltry;lpll'.'j':1"1 under urrucl For erarl]prc' example' ing for lnS and equity' compensation of ol theremightbea question pro pro pay pay the the much to how much how

assezrare' lilSYl'" ]ffir;lHmr::*::c' [';':iiil#x1'J;lill: oroverseer aoao : advisory pori,ionunO.".u ,n.

Maintai qrowtn .-tricf Managi Til"naEng regarolng , especElly andequity ownership

iir.

I

sameamount of effort if the

to payhisson ownerdesires .tasereuuricownersq*llyt*:::*$ffi "unlnvolveo #nitrJrhlffi ]-^llll,"";:$-.d,ffi6ffiffi (Atthis familyandprotesslonalor Manaqement Professional :]H::]#

pornl, familyceaseito exrslin s purest form)

l.*

^^^{rr..r^.r ^^rr"h*"ti*

..r."..r,r*gu*;

f- ,**.".rt*"*,

oaLrnalisric - conflicted family orpatriarchal pup11,r!l",.t.rtTt, _ L

I

sionandinheitancehaveto to be made:who deserves hold rhe reinsof rhe com

_

TheAsianManagerI Ma.ch-April/May-June1997

I

family collaborative 'laissezjaire business orparticipative - advisory board

betweenthosewho own the ing fairness thosewho run the com versus buiiness TheoreticalFoundations it. In thefourthstage, pany as own aswell The theoreticalfoundationsof large thatthefamilycanisso famcortheoryspawnedfrompsychology, thecompany "going itself anyrnore; onepartin the moreclinicalform of the not manageit by "familyasa system,"whiletheotherpart public"becomes an option. in family-owned changes In general, theoryReoriginitesfiom organizational by arespured suddenor ui seaichon thefamiiyfirmhasbeenskewed coryorations in favorof the latter,on the growthand sisevents,suchasdeathof the founde!a suchasits sale,or developmentof the family firm and its changein the business a period a mergelwith anothelcompany, accompanfngculturalchanges. "bust," "boom" or fundamental or ly.i liqao) identifiedfour stages of such in theexternalenvironment, in the liie cyclesof a familybusiness:-1) changes Dyer andproducts. technology, 2) gowth andde- asmalkets, creatingthe business; thatare culturalconfigurations to the genera, advocates succession velopm"ent;'31 allowconflict to externalfactors, andprofessional sensitive tion;4) publicownership innovation and encourage management, (seeExhibit1). management generain succeeding byer,s frameworkcentersaround and development "Value" cultulealso that oc- tions.The t'?e of leadefship changes the culturalor (hielarchi frombeingpatemalistic g.owsandispassed evolves curasa familybusiness g"nerationr.EachstaSe call, to iaissez'faire(halmonizingand on to succes;ive within ploactive),to participative(gloup'oli' of a cultuialconfiguration consists the family,the organiza6;nor business, Lnted),to professional.

(1983)proposed that the Lansberg and the board,which is the long.term is haldto institution as an business family of the firm. strategizer and implementor of the inherentcon' dif- undelstandbecause Concemswithin the familybusiness andmore(of tradictionsbetweenthe family and the fer asthecompanyexpands which, cannot areinvolved business-contradictions family members less) maybe firm remains as the as long be resolved the buslness. in (SeeExhibit21.Thesecon' t]lrefirststageis about family-owned Forinstance, by thesimulta aremanifested while tradictions business, a successful establishing as familymem' owner has roles the neous the busistages, as third and in thesecoid theydi owner-manager; and business ber turnover beiome concerns nessmatules, to man' ability overall the leader's minish between and distinguishing of leadership ,,blood"and,,sweat"equity-ie., achiev- agethebusiness in asreflected effectively, lZ

I

munug:t ,. .lamcor moves moves As the As tne famcor generation' to the successive

professional influence Organization: management : overseer Family vs publicinterestEoard

[I;iffi?]]i5;iffi'#

i;:[r'T':il'll,if:f;

and who in the financially, the business familywill remainpartownerofthe busishares partsofthebusiness, ness(certain of stockl,but will havelessor no sayin the way it is run. Conflictbetweensuc' 1SOneofthe$eat andinheritance cession estconcelnsfor thehealthof thebusiness andthe family.Confrontingthisdialectic bytheowner'/ cannotbeavoided situation founderof the business. "coping mechaIn these cases, nisms"thatareusuallyresortedto areer betweenfamilyand thel a compromise businessprinciplesor an oscillationbe' tweenthe two. Theresultis oftendissat' isfactionboth within the familyand the proposes ThesolutionLansberg business. on is to dichotomizefamilyperspectives it and who own those between fiIm the it, such thatthoseon thosewho manage the ownelshipsidewould be guidedby familynormswhilethoseon the manage' ment side,by businessnorms This ap' "rolecarryover" reduces proachsomewhat "role conflict." or from ln thetansitionofthebusiness the family next, generation to-the one by overlapis furthercomplicated business ofpro' professionalization, or theentjance fessionalmanagement,lhus extending famiiyflrm interactionto outsiderswho will applyformalbusinesstraining'and lelationships existingpersonal will change of the employees and betweenthe family tenthe increase in so doing, theflrm,and

sionin decision-making (SeeExhibit3). public," or sharedownershipwith the Alfonso.3 Morerecently, project a two_year Organizational theorydiscusses public(SeeExhibit4). Her research was runningfrom l9g9 to 1991 conducted business aspects of a familycoryoration. wlitten into severalcasesthat are regu- caseresearch studieson famcorsbasedin Clinicalpsychology focuses on the family larlydiscussed in AIM'Sregul andelec- thephilippines.

About20 cases werewTltaspect offamcors, specifically onthetheory tivecourses on familycorporations. tenon variousthemessuchassuccession. of the familyas a slrtem. The principal Lee{1995),andLopez(1992)have rhe management of professional manag_ . s o u r c e o n t h i s t o p i c i s B o w e n additional inputto the familyandorgani- ers,,,goingpublic,"inheritance, andgov.

8),who considers a familywith zationaldlnamicsof famcors.Leeposits ernance.

11972,197 Ouintosdeveloped initialftame, childrenandthepreceding generations as fivedynamicpsychological forcesat work works to help understandproblemsof one familysyslem.A cerrainrangeof within famcors: individuationi power;sib- famco$.In theinitialphaseof theproject, behaviors is "emotionally" prognmmedin ling relationships and othernuclearalli, however,someowre$ wete relucrantto individualsfrom the time they areborn. ances;in-lawsandotherextendedfamily talk aboutfamilyprcblems related with the Humanbehaviorisalsobasedon thought, ailiances: andprolessional managers and business. the right behaviorbeinghintedat to the the family.Her methodology focusedon In determining the criteriafor suc. individual.But in momentsof stress,an the casestudyandthe SFI(Self-Reportedcession, two concerns wererased: individualtendsto revertto actionbased FamilyInventory Test)measurement ol the l.

Whether or not therewasa ca_ on one's"emotionalptogramming"that healthand competence of eightFilipino pablefamilysuccessor to the familybusi, couldconflictwith therationalityneeded and Chinese-Filipino famcors,aspectsof ness;if therewas,was this personinterin soundbusiness practice.

Ouinto_s earlierwork,andidentifying traits estedor not in takingovertie business; Otherliteratureon the familyasa offamilies in successful corporations.

Fam, 2. Whatto doii morethanonechild systemincludesLevinson(1971)who ily valuesandbusiness concemsare,,en- wascapable oftakingover;if thiswasthe pointedoutthatfather,son conflicts aswell meshed,"thattogethertheyinfluencetie case,the lounderhadto decideto whom as relativein-fightingwere a sourceof healthof the familyand business asone to handoverthe business. problems forfamilycorporations, andif not organicandintefactingsystem.

In the initial round of inteNiews, resolved couldevenleadthe corporation Lopez{19921,with her systemper- thercwere,,common experiences" among to failure.Kepner(1983)alsosaidthatthe spective fiameworkof famcors, soughtto famcorsheirsthat tendedto encourase strandsof thefamilyslrtem weresotightly understand variousptessules exertedon themto participate in thefamilybusines. interwovenwith the businesssystemthat the owner,/founder by membersof the Thesewere formattraining,earlyexpo_ they couldnot be disentangled without family,management, board,andinvestors sure,and independentchJice.This ap, disruptingeitheror bothsystems.

(SeeExhibit5). pearedto be the casewith Sarmiento With regardsto succession, deci(1989),whereownerFeliciano Sarmiento sionsrevolvedaroundthe interactionof CaseResearchon FAMCORs: hadto selecta successor fromhissix chil_ threeforces:the founder,his family,and EmergingIssues dren,wherefour of when had beenin. the firm; successful management of all TheinterestofAIM in famcordates volvedin the familybusiness in different threeis requiredfor survivalof the busr backto the 1970swith a srudyby Felipe degrees. good A soiideducarion together ness.Equalshareholding wasidentifiedasoneeffecExhibit2 tive measureof succes, FAMILY ORGANIZATTONAL OVERLAP (Lansberg, 1983) sion.Heirscouldeitherbe daughte$or sonsbutthey oftenhaveto win respect of otherson theirown.

AIM Research on FAMCORs AIM's research on famiiy corporationsis basedon Ouintos(l gg2) and Lopez (1952).

Ouintosresearch is a case identifyingkey business and organizational concernsin six Filipino.Chinesecorporations.

Herresearchfocusedon succession and inheritanceissues,professional management entry and "going

ChietExecutiveOflicercshould:

Parentsshould:

SELECTION Hireonlythosewhoarcmoslcompelenl

SELECTION Provide opporlunities lo relalives in need (padicularly iflheyarehisor herchildren) COMPENSATION "allowances" Allocale in accordance with developmenlal needs

COIVPENSATION Allocale salanes andotherbenefits in accordance withma*elworlhand history FOUilDER:performance WHATTODO?

APPRAISAL Noldiffefentiate between siblings, regard ndividuals as'ends:mlherthan as"means"

APPMISAL Differenliate belween employees lo identify highperfomers, fegardindividuals moreas 'means'lhan 'ends" as

TRAINING Prcvide learning oppodunilies designed tosatisfy theindividual s developmental needs

TRAINING Provide learning opportunities designed to satisty organizalional needs

March-April,/May-June 1997 | TheAsianManaser

13

AndrewSiohadbeeninvolved to interpretthe resultsof tie SFITeston case, to the com' guised wlth early,informalexposure measudngco' house eightfamilycorporations, lamilynoodle the children in thegenerations'old to encourage pary appeared perleadership expressiveness, Andrewfelt he oughtto be re' hesiveness, followinrothefamilybusi' business. ro eventually conflict,andoverallhealth./comfactorin tiis choice wardedfor theextraeffortheput into the ceptions, ness.A key success petence. fam that other did not agree and business, pressuring children the wasnot forclngor The first force at work is who werenot helpingrun it Mostof thesewere ily members to gointo thebuslness. asopposedto togetherness individuation, in key business say to have equal ought finaldecision. criteriafor Feliciano's (Minuchin, (Bowen or enmeshment 19721 wanted however, His relatives, plesent, decisions.

If thesefactorswere not (1985)bestdescribes problemsemerged.In Dizon equivalentsalaryraisesif they $anted 1987].Rosenblatt succession membershaving as family individuation relin' to were unwilling his, and Andrew question of succession Mines(1989),the "sufficientautonomyand separateness their despite quish of the business profesconuol with the entranceof overlapped Thecon- fuomother family members."An indi of involvement. to the varyingdegrees Thesuccessor sionalmanagement. "accepts and with his Fili vidualby thisdefinitionalso rift an eventual sequences: hisown suc' originalfounderwasseeking goals, in pe$onal differences negotiates up of the setting pino-Chinese family and noneof thefamilymemHowever, cessor. theimpllaccepting Chinese valuesandstandards, andhighlysuccessful in runningthemining acompetitor berswasinterested without defy' differences, of such cations fastfood business. businesswhich had madethe family permission, affir' seeking without ing and and question of compensation The wealthybut all wantedto sharein the goals." primary as approval and of mation, in the case was also important Onesolutionwas benefits wealthit hadgenerated. is stdkingthedelicate Individuation the busi' to professionalize andpercloseness befween balance ness,andpartof thisinvolved a feel' it spells differentiation; sonal otferingsharesto the public, 3 Exhibit for one's seif-responsibility ing of and slowly increasingthe (Davis,Leach,Gallo,1990) fateandtheabilityto genuinelycare OVERLAP THEMANAGERIAL man' presence ofprofessional for others.On the otherhand,too agers,sinceno clealsuccesor "disengagemuchindividuation, sorcouldbe designated. ment," meantthat an individual On the themeof man' was independentand uncaring in agementof professionals hisfamily. about revealed casestudies famcors, ln the samemanner,togeth' in bothtopandmidconcems a majorinstinctiveforce erness is levels.Own' dlemanagement family,evolvingftom the the within e$ weremorewilling to regroup in ordert0 suNlve together to need (1989).

Compensation linquishpoweratthemiddlemanagement D.M. Consunji of togetierness result 1972).

A was {Bowen, level.Oncethe companyreacheda cer' highly in favor of family members relatedinamong harmony is the ensuing creatand otheremployees thatpro' demoraiizing tainsize,itwasalmostinevitabie be' of responsibility a feeling and professional dividuals wouldtakeoversome ing high turnoverAlthough managers fessional much togethemess, But too yond oneself. had enteredthe rompany dutiesthatwereoncesolelygivenonlyt0 management stillfeltca- or enmeshment,has negativeconseAt this point, concem sffucture,thefami]y,however, familymembers. on theirown. quences.If an eventcausinganxietyocof the ownerswashow muchcontrolto pableof rundng thebusiness professional were curs,mostfamiiymembersare likely to managers Profes- Nevertheless, relinquishto theseprofessionals. circuit position of gen' feelit, asif theywereanelectronic for the abouttheircareer belngconsidered wereconcerned sionals 9781.

Fami' I togetler lBowen. roo fused sincemoreoftenthannot pro' eralmanager-somecriteriabeingtheir in famcors, three in enmeshment with could cope andloyalty,andwhetheror lies werein the sameage competence managers fessional "es' and physical d istance ng I cread ways: I of not theywouldbewillingto dealwith the rangeasthe childtenor grandchildren suchasgettingdeeply aspects oftheconsfuctionbusi cape'mechanisms this 'unethical' the owners.FromAIM'sperspective, or havingan one's business genin invoived In anddealmaking). its graduates ness(kickbacks raisedthe issueof prePadng based conflict of madtal 2) a cycle affair; to vali' appeared studies in the contextof eral,caseresearch to managetheir careers quali' negative the other's criticizing afamilycoryorationversustheprofessional date the issuesthat were documented on sensitive emotionally tiesandbeinghighly in the West. extensively c0mpany. andreconciliaton; distance to oneanother, issuesemerged Twoothersensitive "dys and3) itself; repeats thenthe cycle and Psychological Dynamics of Famcors: in this initial study: compensation in the formof con' Lee provideslandmarkdata and functionaladaptation" benefits,andspanof control.Somecases reassuming or unconscjouslY Herdis' sciously famcors. forstudying of thesetlvo methodology indicatedthat mishandling t0 members' family for other on individuationand poweras sponsibilitv ateaswascausefor the eventualdestruc- cussions or spouse one's point dominating of tion of thefamcor.Unlessthesefwo areas appliedto threekindsof familyd].namics the (Minuchin, I q87). proqpes children and possible of famiiy all cover of both to the satisfaction handled were t According o Lee, lack of within thefamcors relationships fre familymembersand fie profession fessional procmakesthe succession als,theycouldeventuallytearthe coryo' Shedrew a generalproflleof successtul individuation is patdarch, who the because rationapart.ln HaoCher(1990),a dis- famcorsbyusingtheflveforcesftamework essdifficult, 14

The AsianManager I March'April/May'June 1997

reluctantto let go of thebusiness, will be boredandwill not feelhis Exhibit4 DECISION childrenarecompetent TREEFMMEWORK FORPROBLEMS enoughfor OFSIXFAMCORS the job; he most of all wants (Quintos, 1992) offspringsto do what he wants.

Moreover,theoffspringis not likely Capability of Heir to stopthe pa_rent.

Individuation tr'-r'liiitil!.i.oiqilarin.or in thebusiness E^_j,., insteadallowedfoi l F a my a certainautonomy andslnergyof f (Succession) [familymemberswithin the busi ness,althoughthiscouldalsolead to familytensions.The idealbaf ancewasa "midpoint"betweena -. I Topl\ilanagement familythat was too enmeshed Founder's or Head completely disengaged.

Thesecondfamilydynamic l\4iddle Management Grolvth is powerwithinthe family.There arepowerrelationswithin thefamily s),Btem, with controlastheprin. cipalissue.Onedefinitionof power SelltheBusiness .l was "the ability (potentialor ac.

(Areas ofConflict) Outsiders tuall of anindividualto changethe ofRelattves behaviorof otier membersof a sociai system" (Olson and Cromwell,19751.

Hatey, who propoundedthe theoryof the family asa s)rtemof power(1976),used theanalogy ofthe thermostat: oncesome, followingConfucian values,thepowerof inlaws. For the entry of inlaws to be thingoccursto movebehavioral patterns thepauiarchis accepted andnatural.Filial favorable,theremust be flexiblefamily beyondestablished ones,overtor cove piety,mutualobligations, andreciprocity boundaries, excellentparenr-child relapowercomesin andre-establishes balance. arethe rulingvalues,according to Lee. tions,siblingswho are affectionate and Sincefamilymembe$haddilferent Put together,individuationand caring,anda "match"ol the inlaw,sperbasesof power (legitimate, referent,ex- powerhavediiferentapplications in three sonalityand backgroundwith that of the pert,infomational, reward,andcoercive), fundamental t!?esof relationships which parentsaIIdthet children.Ifall thesefacdifferentformsof familydlnamicscould existin a lamilybusiness: torswerepresent, anin,lawcouldbewef emerge:attemptsto elicit cooperation; . siblingrelations andotier nuclear comed;butifatleastonewasmissing, the successful attemptJat cooperation; asser- familyalliances; inlaw would havea hardtimebeingac. tion of orte'sleadership, . inlaws andotherextendedfam- cepted.An inlaw contending which was aufor a top thoritarian,shared,or non,existent(no ily relationships; and positionin thefirmcouldbemetwith ieat. leadership); or changes . professionals in leade$hipstyle, andottlernon-fam. ousy;daughtem-inlaw hadparticularprobgenerallya reactionto crisissitua[ons. ily relationships with thefamilybusiness. lemswith familieswho wereattachedto Applications of thesekindsof powerwould Within the nuclearfamilt thereare their sons.Asiandata,however,showed resultin differentlevelsof cooperation. threekinds of relationships: between thatin-lawsarestillpreferred overoutsid.

In the family firm, the owner,/ spouses, betweenchildren,andbetween ers{Westwood, 1992). founderhadpower,usuallyoverboththe a parentandachild.Theidealnuclâ&#x201A;ŹarfamThethirdr)?eofrelationship is thar familyandthe business, but experienced ily relationships arccohesive.Thereis joint of professionals and other non.family rela. sfessfrom "internalizing" contradictions parentdecision makingandclearcommu, tionships with thefamilybusiness.

Differthatafebuiltintohisjob(Lansberg, l9g3). nicationol thesedecisions to thechildren. encesbetweenthe original,/traditional Powelwasalsotjed up with succession, When they arenot, externalalliancesare leadership andtheprofessional leadership in thatt]Iefounderwassometimes aftaid formedwith othernuclearfamilymem. aremostevidentin background andatti. t0 let go dueto the fearof losingpower. bersto "compensate" for the uneasyrela- tude.Professionals areproudof theirmanRelatedto these,therefore, werethe exit donship.Partjcularly amongsjblings,the agement skillsin keyareas,andaremore stylesof familyfoundersor leaders. questionof fairness is strong.parentsof- cautiousthan foundersin their commitThe conceptof powerhappensto ten agontzeover inequity,an important mentto thef,rm, sincetiey areconcemed differamongcultures.In Asia,powerand questionwhen the familyreachesa suc- with career advancement.

Personality is respectaregven to parentsandelders,a cessl0n stage. anotherareaof difference:Silos(l99lJ reflecdonof the acceptance of familyhiThe secondrypeof reladonship is aptlysaidthatprofessionals hadmoreeffi, erarchy.More specincally with families with extendedfamilymembe$,suchas cientmeansofdealingwith problems ver-

I lfs,r..:y) i

March-Apri/May-June 1997

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'slow, roundabout, Company who wasin control;in fact,a familyhad inffi- muchasit affected thebusiness. susa founder's patterns" or professional, to adiustwhen therewaspowelconcen' afam- culturewas paternalistic whereas cateanddelicate "professional and the owner'sheirswere not trusted trationin the handsof oneor a few peo ily wasunlikelyto tolerate to be (A more pleasmuchaswhenno oneseemed behaviorthat doesnot respectthe family with majorcompanydecisions. " r^dD ^fto^ rrncnnlzon relation' Amongsiblings, family,it wasalsofound,was thepower-holder cohensive Basedon her study,Leefoundthat morelikely to acceptin-lawsthan a less shipswith oneanotherwoulddependon of how fair their parents one.)I[ powerwasexertedin a theirperception individuatedfamilieswith egalitarian cohesive fashion, asin slightly \ , \ / o r p i r p a l i n o l h p m powerstuctureswerethosebestgeared moderate dominance Onecasein pointis the Perezfamfamilies,the familywould be Spouse enmeshed for success in tie familybusiness. who of a printingbusiness, ily, owners the business could suffer. and exclose, but were strong,open, relationships The [aprob as'enmeshed." were diagnosed even more The situation was pressive; theytook careof their children until he of the business ther had conffol in families.

Farnily andwerewilling to choosethe familyover lematic disengaged at anygiventime.Moreover, memberssharedfew interestsand,even hada stoke,atwhichpoint,hiswifetook thebusiness "extreme"senseof on an individualbasis,rarelylived satis- over Twoof the Pelezsonswerealsointhesefamilieshadan onein marketinS: fegardless of how muchtime or factorypersonallives.Parentshad little volvedin fie business: faimess; production. in Therewasstrong presence inthe other in their children's lives, or e[forta familymemberspentin thebusi' "being them, and one of gven pals sibling rivalry among with their kids". thesamenumber sistedon ness,heor shewas parents' was the felt that the other Iithem in handling of shares.This was perceivedas fat by Theyalsodid not succeed probfirm.

Part of t]Ie favored son in the Disengaged everyone. butonlyif tie powerholderin vdry amongtheir children. strong to be the mother's as 1em appeared Lhefamily'ssourceof powerwaslegiti- familiesalsodid not trustthef children to her sonsandthe brothers' attachment to the business. maKngwasdonein a con- validsuccessors mate.Decision of the two was strong rivalry.

Neither The willingnessof the owner./ mannetSuccession wasdiscussed sensual andthebrothersperenough ro take over founderto retirewasonemajorfactorin openly. not relate well with eachother process in famcors.What sonallydid In lessindividuatedfamilies,less tle succession siblings who werenot as with their otier individuationdid not affectthe familyas wasimportantwasthatthechildrenknew in the business.

Lee'swork alsovali' Exhibit5 datedOuintos's earlierf,nd' (Lopez,i992) SYSTEM PERSPECTIVE early exposure ings that witiout coercion, andtrain(although not consid' ing the eredcruciall,and opportunity to ioin the business FAMILY cdteriafor weresignificant a familymemberof thenext Goal:Tocarefor anddevelop familymembers generation who wasthink' ing of joining the family Memberchip: Bloodand business.

Lackof earlyexposureandtraining,aswell OWNERSHIP familycomasproblematic I petenceissuesmared both ' Goal: policy I Toestablish Goal:Toinvestin a relation' familyandbusiness prolilableenle.prisâ&#x201A;Ź anclmonilornexeculonof i shipsof the Gotongfamily.

Membership: Capital Thefounderof thegarments I Business Membershrp: diedaftera second business lI i -- ---Eg'lll3 -- -- r stroke,with no clearsuccession plan outlinedlor his t h r e e c h i l d r e n ,e a c ho f , Goal:To manage operalions, whom had an estabiished .

I to ensureefliciency/prof career(medicine,accountThey ing,andarchitecture). , Membership: Management Competence had only enteredthe businessafter their fatherhad his first sboke.Theyoung' e s t d a u g h t e r ' sh u s b a n d Founder\ Chalhnge: Tobalanceundelying dynan ica/confli cts loinedthe familybusiness, handlingit sowell tiat he seemeda likely successor 16

the AsianManagp.I Manch.April/May-Jone1997

whenthe fatherdied. ingfulsynthesis ofall concerns andpoten, cessful?

The family intervenedin several tial areasof conflictin famcors.

What seemsto be clearin Lee's waysto stophe business frombeingrun Lopezoperationalizes the concems work is that evendeeperunderstanding by an inlaw. Theeldestdoctor-son, who of differentplayersin famcorsasgoals,and of psychological d)rnamics of familyand hadinadequate experience, wasplacedat membership citeia Simil to theframe- business is needed.

Fromherfindings, fam. the helm of the firm, while the mother, work ofthe ft?esofpianning,a eachof the ily therapyalsoappears as a measureof who hadalwaysbeenahomemaker, came four circlesexplainsthepdncipalgoalfor conflictresolutionbesides providingconln astreasurer to taketheplaceofhersec, involvement in famcors. venLional management consulting.

This ond sonwho had prematurely died of a For the owner,the goalwasto in- canbe doneif the needsof famcorscan stroke.Theyoungestdaughtercamerc tne vestin a profitable enterprise, andtherea be identined. pointofpressing legalactionfor whatshe son for membershipin the famcofwas Anotherquestionis aboutmethod, claimedwasher husband's dghtfulplace financialandpsychological invesfnenrnto ology.Ouintosand Leeboth mentioned in thebusiness.

Buthermotherconvinced the business.

Thefamily'sgoalwasto de. the reluctance of somefamcorsto discuss ner not to, so the daughterandher hus- velopandnurturefamilymembers, and familyproblems relared wirhthebusiness, bandpulledentirelyour of the business, the reasonfor membership, the bloodor or aboutfamilyproblemsat all. It thus althoughtheyremainedstockholders. marriagefelationrelativeshad with the seems unlikelythatanin-depthfamilyand Related rothesuccession issue, Lee owner.The boardtook careof strategic business studyo[ famcors based on a ranrecommended thatchildren reflectonwhy planning,andwasin the famcorto offer dom samplecan be made.

The general theyenterfamcors,t:e, whetherthe rea- its expertise to thebusiness.

Finally,man- implicationoI thesesituationsis the rel, sonwastheideaofopportunityofsuccess agement(top,middle,andrank-and-file) quality,andusefulness eyance, ofthe data andpersonal fulflllmentin tie famcor,or arein thefamcorto helprun thecompany beinggatlered it families per. {especially afeelingofguilttowardsonebparents.

She on a day,to-day basis,assist in makingthe sistin requesting for dataconfidentiality, recommended the useof familytherapy companyprofitableandofferown mana- to lie poinr of askingLhatsomedambe in problematicfamcors.The therapy gerialcompetence. strickenoff the record),andneedsro De wouldfocuson specificproblemsandan Lopez'smodelillustrates the inter- considered in the future. extensive reviewof a family'shistory. play of four differentsystemswithin O r h e rk i n d so f u n d e r s r a n d ionfg Leealsonotedthat independence famcors.At the centerof all theseis the famcors will eventually haveto comefrom appeared not to matteras much in the founder,/leader, handlingfour simultane. sociologicaland legalaspects.Another Asianfamcors asopposed to theWest,and ousroles.Theownerin themiddlerepre prospectis a more holisticunderstanding that authodtarian leadership appeared to sentstheneedto constantly balance con- of famcorssociological atd historicalrole be a legitimare formof power.MoredaD cerns{orconflictsof interest)thathe and in societyaswell asincreasing sourceof to validatethesefindingsarecertainly war- hissuccessors mustcontendwith. At the economicgrowth.The legalunderstandlanleo. sametime,the founder,/leader alsogap. ing, which Lopezsuggests, would be If the familywasoptimal,the fam- pleswith the externalenvironment.

The neededto understand otherIactorsthat ily business will, mustJikely,be healthy fourgoupshavediffednggoals,member- complicate theissueof succession. but not necessadly theotherwayaround. shipcriteda,andcharacteristics, whicnro.

An extension of thisunderstanding It was alsolikely that family problems getherv/ith the hardshipsof a competi- fl$t in the Philippines, andeventually in would find their way into the busness. tive externalenvironment, contibuteto Asiawouldbe how to differentiate Asian Familyproblems penetrating thesphere of conflictandarea sourceof stressfor the fromWesrern famcorsin termsof t}Ievalbusiness alsotendedto affectthe succes- leader. uesupheldandtheir d!'namics.

By then, sionissue.Forsuccessful succession to ra{e keysuccess factorswouldhavebeeniden, place,full indiyiduadon wasneeded, an Conclusions tified and usefulprescriptionto famcor egalitarian powerstructure, cohesive,/lov, Conclusions on tlie researchAIM problems shouldbe closerat hand. ingparental andsiblingalliances, effective hasconducted sofarleadsto newresearch relationships with theinlaws,profession. quesuons.

Endnotes: als,andoutsidets.

In sumsuccessful fam, I Yu,Daniel, One generaldirectionis to find ar.

Lim.SiongHoon,Low, ily corporations werewell-individuated. easofdifference betweenAsianandWest- Sorching, Tirol,Stella,Behara, Meenakshi, This raisesa new issuequestion: em famcors.

Ouintosstudyvalidated West- andMiller,Lee."Asia'sRulingFamilies.', Wouldall fully-individuated families,by em research.

Lee\ workalsodid.aJthough Asiamoney, October1Ao4.pp.2o27. the samecoin,makesuccessful ventures sheobserved 2 In pardculat thatsomeofthe familybusi. rheabilityof family. into family'corporation building? nesses that were fully individuated, and ownedChinese nrmsto overcome thehistherefore successful, did not haveto have toricaleconomicobstacles facingthem, SystemicInterpretation a fully egalitarian powersfiucture. managing to dseandbecomemajorecoof FAMCORs What forcesin family businesses nomicpowerhouses with importantlinkA fiameworkthat attemptsto fur. wereWesternandwhich wereAsian?If ageswith various Asiangovernment5. therclarifyrolesandreasons for member, non-Western r Professor, business metiodswerebemanagement consultant, shipofthedifferentparticipants in famcors ing usedin successful famcors,to what andnow President of the AsianInstitute is offeredby Lopez(1992).lt is a mean. extentdid theyrenderAsianfamcors suc- of Management.

Ma-rch-April/May-June 1997 | The AsianManaser

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a For the familY:estate Planning, fof mechanisms inheritance or establishing the family.

Forthe owner:successionPlanning, planningthe processby which a to wouldbe designated worthysuccessor takeoverthe business. in thebusiness: Forthemanagers strategic planning, which dealt with thatweregoodforthe decisions long-term business.

49, No. 2' Review;Yol. Business Minuchin,S.[1987]Familiesand HarvardUni Familytherapy.Cambridge: Press. versity Olson,D. H., andCfomwell,R E. NewYork:Wiley in Families. ll075lPower andSons.

Purcell,\4ctor [ 965]TheChinese Asia.London:OxfordUni in Southeast versityPress,England.

Ouintos,Ma a Vir$nia B. [1992] Un' CaseStudieson FamilyCorporations.

References: published Mastef'sThesis'AteneoGradu' "TowardtheDii Bowen,M. [1972] Makati. ateSchoolof Business, of A Selfin One'sOwn Fam' ferendation The R e d d i n gG, o r d o nS . [ 1 9 9 3 1 ily" in J. Framo,ed. FamilyInteraction. Spiritof Chinese Berlin:Walter Capitalism.

NewYork. de Gru)'ter FamilyTheraPY Bowen,M. 119781 PaulC., de Mik, Leni, Rosenblatt, NewYork:Alonson. in ClinicalPractice.

Arderson,RoxanneMarie,andJohnson, Davis,John,Gallo,Michael,and PaLricia A.[ 085]TheFamilvin Business.

"Non-Family ManagLeach,Peter[1990].

Inc. Publishers SanFrancisco: Jossey'Bass Semimaterials, ers."Bulletpfesentation Silos,LeonudoR.II 991] Oikos:The TheFamilyBusiness. naron Leading "The Trealaees-sfQl€aflzalo!. Makatj:Asian Donnely,RobertG. [1964] Instituteof Management.

HarvardBusinessRe FamilyBusiness."

MunaY,andHughes, Weidenbaum, 42,No.4. view,Vol. Samuel.[1996]The BambooNetwork: Cultutal Dyer,W. Gibb,Jr 119861 A areCreadng Chinese How Expatjiate and Changein FamilyFirms:Andcipadng in Asia.New Superpower New Economic andFamilyTransiUons. York:FreePress.

Business Managing Inc. Bass Publishers, SarFrancisco: Jossey Problem'Solving Haley,J. [1976] This paperwas presentedbY the PubJossey'Bass Theraov.SanFrancisco: FAMCORteamin the ADSGMInternaIishers,Inc. Conference, Reseatch "Managing tional Business IvanS.[1983] Lansberg, 1996. in FamilyFirms:The HumanResources Overlap."Oryanl' PlofessorlacinLoC. Ga1)ino,lr', the Fr' Iames of Insdtutional Problem ot'BusinessEthics,is the Donelan,S.l. Prot'essor zationalDynamics, PP.39'46Deanfor Researchlfifet et Address: Associate Lee,OueenaN [1995].ThePsycho- <jgaoi no@aim.edu.ph>.

FamilyCor' ofSuccessful loglcatD)4:Iamics L- Roman, Explolatory Francisco and Professor Ir ' , theDonAndrcs porations: A Descdptive is(urManI\efi?nI Busineit of P,olPssor Soriano DoctoralThe' ClinicalStudy.Unpublished WLshitl|tonSyCiP to Lhe AIM assigned rcntlv sis,GraduateSchool,Ateneode Manila 'Poliiv Forim as ExecutioeDirectot.lnternetAd : <t'rankid@aim.eau.Ph>.

OuezonCitY. dress University, The Limlingan,victor s. 119861 theDonRimonCarc MatiLnoS. Lagman, Chinesein ASEAN:Business Professor Overseas Prcfessorof BusinessManagement,is a corelacPractices ullv membetin theMasterift Management(MM) and Management Strategies ph>.

Corporation. <ning@aim.edu pt;gram.lnternet Address: \4ta Development Pasig: Lopez,PatriciaDeniseJ. [19921 MLVirginia B Quinlosis a corefaculLy "Family.Owned pre' Prot'essor A paper Businesses." of theMaster in Maflagemet ProSlafi lnternet School Addless:<mbq@aim.edu.Ph>. sentedto the ColumbiaGraduate NewYork. of Psychology, "TheFamily PrcfessotPat/iciaDeniseI. LoPezis a corefaculty Kepner,Elaine.[1983] Prc\rcltt1 Managetnent Perspec' of LheMasterift Busifiess and The Firm:A Revolutionary aim edu.ph> IntefteLAddress:<pdl@oinesmail tjve-" Organizational Dynamics.

Associlteof 97ll "Co.1nic$ Mari1nneC. Catufidangis a Resea/ch Harry.[l Levinson, Policy Fotum Sycip AIM Washington the Harvard that PlagueFamilyBusinesses." fg

The AsianManaget I March-April/May'June 1997

1996 PHILIPPINES GOVERNMENT DIRECTORY With an ind.x, rhis diEclory co.lEins narc' addr.3s... ld and phon€ nlmb.B ol ollio.s i. th. thr.. branchcsol gov.hrenl, includrngprovhcral' city,municipalsulhodi€s,.nb83i.3 !nd @nBulaLs ol lh. Philippin.s, gov.mh.nl corPoranon3' comlitulionalbodica,slatc @ll€9.6 .nd univ.Bilics.

P55Or copy In lh. Phlllppln... usf,.lo 5 -pv tor ot miljng ah.l h@dliag. ovlF.ss o.d.F, irctust

& 1996DIPLOMATIC DIRECTOM/ CONSULAR Ofith€ pr.3t J !n6 10, 1996w{h ldelcLphon. .uhb.c, ihB comp..h€Niv. 64_P.9. dnFlory conlains upd.t.d lits ol 1) .mb435i.3, co.rulal.3' inlernalio.al org.niz.tions in M€lro Manila, 2) .mba$i.3, comul.l.!, honodry consulFl.s ol lh.

Philippine, 3) OFAofiici.l., DFA.tlach.d.g.ncr.!, ollic.s i. th. pfovincei .nd rl) ahbasledoi.l Includ63ln. DlPlomdlc Soclrl t .!tf,, 6 guid€ andth.n lamili.t publi.h.d lor U, S, R.pr€.nlltiv6 by th. For.ign S.tvic. l.tlitul.. U. S stal€ D.padm€nt, washinglon D. C Thb Prel@olgurd. may also b. us.tullo olh.r diplomaG,govomm.nl otlici.h, int6.nstio.al bu3in.ss ex€@llv.s, 3chool ofidals, t€.ch..! a.d nld.nts ol tor.ign..Mce us015.copv P25O.oopy hlh.PhlllPph... lo. ow6|3.as ord.Br3,i.crst€ otnAili^g aad handlirg.

1996 AD.MEDA.PR DIRECTORY Wilh an ind.t, this b a 96Page dn€dory ol lrts m.dia and 6lli.d oro.niatioff in ihe Phili9pi^c includinoFilipinoli-m.di. bs.d h oih€. countri.s.

P35,{'I copy In th. PhlllpPln... us621 a coPv ord.t!, trclsst! ol mailing an l handlinq lor MR.s

THEDIPLOMANCPOST Thi. B a mo.lhly s.rvio. n.wsp€p.r lh.l publirh.s u..l!l inlofmtbn aboul olh€r @unld.3 indlding vila rcgulalion!, diGctorbs, bull.lin3 and P200.nnu.l .ultorlPtion In th. PhlllPph... lubcnltid..

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For ov€rrsa3 ordcrs P.vmnl!hooldb. Fhin.d th.oughl.Lg6Phac transt€r to U. S. Doll€r A@oqnl N uhbd 5294'000s_ 44, Th. Diplom.tic Poll PublbhingCorPo,albn,BPI FamilyBank,EOSA,M.lib.y abnch,16 c. Jo$ Sl. cohd EDSA, M.lib.y, Pat.y civ, Mslro Manih

For old€r3 In the PhlllpPlnss Pl.as. add P6o to cov.r pno lor riailino and h.ndli.s. Paynt.nt my b. in 1)d.h.nd drafiloThe Oiplomiic Posl Publkhins ColPoralion,P.O Aox 4246 ilcPo 1282, Makali Cilvi or 2) l.l€g€phrc lraNl.f lo Acount Numb.r 529-3G5556_6,Th. OiDlom.licPct PublbhinoCoipor.iion, 8Pl F.mdv Bank Malib.y Branch,16 C. Jco Sl. .om.r EDSA, Malibey,Pa3ayCily. M€trc M3.i1.1300 PhiliPPi.cst,hot.tt, In U.Vo N.nIl. boot.lot Alto.y.lhbL .t d ofi.t outt.t lnalu.tttg 7U F. Ctu, .Ioott cnY At,, U.ttb.y, P...t

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InternalControls in Overseas-Chinese FamilyCompanies: A Cross-Cultural Exploration Understandingthe culturewherecontrolsare developedis key to their successfuluse Introduction plicit in thosegeneralizations havenot andlargeAnglo.Saxon companies hasa "Cultureis bestseen...as a setof control beenaddressed explicitly. separation betweenownershipandmanmechanisms-plans, rules,instuctions Implementing thosegeneralizationsagement.

Managers do not own sufficient engineers call'programs') in situationswherethe implicitassump, sharesin t}le companyto havea confoliwhatcomputer -for thegoverning olbehavior."

(Geertz, tionsdo not hold is fraughtwith danger. ling interest.Theyhavebeenappointed 1993).Whilecultureseemsasa control Internalcontol sistemsimplemented may to theirpositionthrougha combination of mechanism, intemalaccountingcontrol notwork asplannedandmaynot achieve skills,experience, qualifications, and tal. mechanisms arenotconsidered paftofcul- desiredresults:safeguarding ?ssetsand ent;not dueto anypersonal relationship tule. ensuringaccuracy of data. theymayhavewith majorstockholders.

One.majorfunctionof internalac.

The conductof externalauditsis Thestaffarenotexpected to displayagreat countingcontrolssystemsis to prevent basedon a relianceon internalaccounr, de$eeof loyaltyto the business andare theft, fraud, embezzlement, and other ing contols. If internalcontrolsarenot freeto leavethebusiness fora berterposjcriminalactivitiesof employees against workingas expectedand externalaudi tion.A company whichwishesto keepits thejr employer(Nash,1989).Literature torsarenot awareof thisproblem,exter- staffmust offersufficient remuneration and 0n internalaccounting is devoidof con, nal auditreliabilitymaybe questioned. othernon-monetary personalbenefltsso s i d e r a t i o nos f c u l t u r ee v e n t h o u g h Organizatonal stuctue andhuman that competitors cannotaffordto pay "The criminalityis culturallydetermined. behavior in Overseas Chinesecompanies more.Also,the staffarenot expectedto definitionof criminalityis cultumllyde. aresufficiently differentfromrhenormin formclosebondswith oneanother.

They termined,varyingfrom one societyto theUS.Generalizations basedon internal arefreeto establish tieir own sociainer, another,and from oneperiodof history contol practices usedin the USareinap. workswhich mayor maynot includeother to another,both in the natureof legal plicable in Overseas.Chinese companjes. staffin the flrm. If a memberdoesform codesandin the mannerin which such Theoriesfrom cross-cultural psychology stong personal linkswithin thecompany, codesareinterpreted".

1966). supportthisargument. {Klineberg, How differentare thoselinkswill not be brokenif the stalf Literature on internal controlisde. theyandwhat aretheimplications in im. memberleavesfor an appointnentin anjustificatlons ficientin theoretical andex- plementing internalcontol systems?

This othercompany. planations in all areas.It only consists of paperexploresthe answer.

Thedominantstructure in ovelseasdescriptions of internalcontrolswhich Chinese companies istIIattheownersare havebeenused,usuallyin the US,and Organizadonal Structures alsoLhemanagers tRedding and Wong. generalizadons drawnftomthosedescripOverseas-Chinese andAnglo.saxon 1986).A familywill own sufficientsha_res tlons.Assumptions concemingorâ&#x201A;Źianiza- companies arestuctureddifferently. in the companyto contol it and mem, tionalsructureandhumanbehavior imThedominant strucrure in medium bersof the family or peoplewith close Marh-April,/May-June 1997 | The AsianManaset

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personailinks to the familywill be the anotherperson,theftaudwill bereported to defraudtheiremployeris basedon the valuepersonal thatemployees or to the boardof direc' assumption quali' to management Whileskills.experience, managers. loyaltyto gratification highly than more andtalentaredesiredin manag- tots. fications, the company. ers,it will be unusualfor a pfofessional individu' indicates Thisassumption posiRelativity Cultural to a senior be appointed to manager in hiswork on na' alisticvalues.Hofstede tion in the companyif lhat persondoes of lntemal Controls against tional culturesidentifiedthe US as the Geertzarguespassionately relationship not haveanexistingpersonal countryin theworld. with theowners.Thestaffofthecompany reducingthe conceptof cultureto a finite mostindividualistic (ountrieslAuslralia, in the way that Holstede OtherAnglo.Saxon to formstronglinkswith the setof measures areexpected andNewZea' Candda. andLheowningtamily.Higher (1980JandSchwanz(1994)havedone. UnitedKingdom, company losesthe land] are alsoextremelyindividualistic. thatsuchreductionism paywill notin itselfbesufficientto attract Heargues in counuies Chine5e TheLhree Overseas interpretative richness of an nuances and The staffare company. staffawayfromthe survey{HongKong,Taiwan, inter' Hofstede's Unfortunately, to form socialrelationships culturaldescripilon. encouraged at theother wereclassified and Singapore) of modern pretative cultural descriptions reladonThese social wilh oneanother collectivist.2 scale as end of the for exrare.

If, are business communities staff if the will besevered ships,however, A majorfeatureof an individualis with Hong ample,Australiais compared memberleavesthe company. pre' interesls is tharindividual Lic 5ociery literature in the anthropological Kong, structo these Thereareexceptions of Lhein group.Anof Hakkacommu' vailoverfie interests cor- thereareethnographies tures.Forexample,the Anglo-Saxon is thatpeo' of individualism other feature Koori a variery of Hong Kong and nitjes in by is conLrolled poralion.

NewsLimited, to whichthey buttheseareun- plewill notformin'groups in Australia, t h e M u r d o c hf a m i l ya n d m a n a g ebdY communities Hofstede's great From loyalry will display cultural relevant in descdbing likeiy to be RupertMurdoch.Rupert'sson,Lachlan, are empioyees individualistic arguments, or in Central of businessmen values father.

But, his to succeed isbeinggoomed beemployer their to delraud more likely George Street. will an AngloSaxonfamily corporation same de the will not display rhey cause reductionist ofusing the One danger operatedilferentlyfiom an Overseas-Chi gree their employer. loyalry to of when Schwartz of Hofstede and measures nesefamilycompany.

(1994)analysis of cross' Schwartz's that cultureisassuming national discussing reasoning. this values conlirms cultural display national of a culture all members Anglo-SaxonIntemal Controls Nash(1988)liststwelveinternal culturalattrlbutes.The nationalculture S c h w a r t z i d e n t i f i e d s e v e n v a l u e two of which arerelevantto with some dimensions, arenationalaverages principles anaccountingcon- measures fordesigning Affectiveauronomvis a this argument. possible find individual It is to confol variations. trol system;maintainanadequate to ahedonistic thatrelates dimension value Anglowho display of Overseas'Chinese properauthorizations environment, asenioying values such It includes Iifestyle. vice versa. and value taits of incompatible Saxoncultural separation transactions, TheUS pleasure, life. and excitement life, in the components Therearethree trans' of information, duties,classification lank countries Angio'Saxon and other by employees: dsk of fraud procedures, checks0n Anglo-Saxon actionprocessing than on this dimension highly more fraud, to commit procedures, thatthereis anincentive errorcolrection dataaccuracy, Anglo-Saxons countries.

Chinese will notcolludetodefraud, Ove$eas use, thatemployees systemsecuritvfrom unauthorized place personal to tempted be more will blow the will ongo- and that otheremployees datasecudtyfrom lossor damage, duty to their of their ahead deftaud who are $atification andreview,documenta' whistleon co-workers ing development will be mofe Overseas-Chinese is susemployer Eachcomponent safeguard' ing the company. andphysical tionofthesystem, "socialself"and protect the to concerned companies. pectin Overseas-Chinese ing of assets. to functionasanintegalpartof thesocial Of thesecontrols,maintainingan network{Yalg,I 981). Yangmaintainsthat confol environmentandsepa- Incentive To Commit Fraud adequate the Chineseattachgreatweight to the incentive h;ve an That employees dutiesare the inter ratingincompatible nal controlprinciplesmostsubjectto 0rganizational suuctureandhumanbehavior influences. dutiesis to The dm of separating Companies Chinose Overseas preventonepersonfiom both undertakCompanieg AnglGsaxon ing the ftaudulentuse of an assetand aremanageB andmanagementOwners oformership Separation recordsto hide the accounting amending linkswiththe toform.strong Sbfiexpec{ed the fiaud.Functionsthat shouldbe kept loyalty todisplay Stafinotexpâ&#x201A;Źctod company; andtheownlng tobusiness: freeto leaveforbelterposts company to minimizethisriskincludeau' .separate payelsewhere forhigher willnotleave thorizationandrecordingof tlansacrjons, elsewhere system StaffnotexDectod toformsocial custodyand recordingof assets, Stafiencouraged totormdosebonds withoneanother; relationships social mayestablish ands!'stemoperation. withoneanother; development oncestaffloaves thesewillbesevered frm;dosebondsand networks outside control in anadequate Incorporated c0mpany broken even will not be nelwotks social that if environmentis the expectation. company if stafileaves by activities ftaudulent discovers someone 20

TheAsianManager March-April/May-June 1997

anticipated reactions of othersto their n o t r e p r e s e nat d e c r e a s e in rhe behavior.

Representation otSksngth of Loyalty to In.Groups: collecdvist orienration of Overseas.ChrC h a ua n d C h a nt l 9 8 4 J ,L i u nesesociety.

Instead, it wasviewedas (1985)ard Redding andCasey (1976J a si'nrhesis of the individual andco, Provlnclal Hon|. statethatego-centered needs,suchas lecUvetraiBof Overseas.Chinese soselfactualization, dominatein studies ciery,andevidencerhatan Overseas.

Workplace of Westerners bur borhChineseman person's Chinese indiyidual or collecagersandemployees givesocialneeds [ve orientation cannotbepredicted by Family a higherrankingthanegoneeds. studying hisor herglobalartirudes ro A second valuedimension idenradidonal vaiues. lt isclearLharmore rifiedby Schwarrzis conservarism. imporDnceis beingplacedon tre re.

Conservatism includesuchvaluesas lationship among co-workers, whichis obedience, selldiscipline, respecdng gaduallybecoming as importanras tradition,honoringeldersand family familyrelationships.

Thereis no evi securiry.

TheOverseas.Chinese coun. denceto suggestit mayeventually sup triesrankmorehighlyon thisdimen. planttheprimaryroleof thefamilyre.

The closerto the c6nler, sionthandoestheUS.Members of a lhe slrcngerthe loyalty. lationship. conservative societywiil be lesslikely Thesestudiesindicatethar rhe to defraudthetuemployetbecause of riskof fraudby employees in anOver, theirtendency to sacrifice self.gatiflcation WilsonandPusey(19821foundthatthere seas-Chinese company islowerthanin an for theseothervalues. is oftenruthlessexploitation of lesspow. Anglo-Saxon companybecause of the (1953)studyof USembez. edul famiiymembe$.

Cressey's geater loyaltyto the empioyerand the zlersindicatedthata non-shareable probPassingnes, Anindividualmayes. workplacein-group.However,the riskof iem is the majormotivationfor convicted tablisha temporarytie with anotherper- fiaudstill exists. embezzlers' attempts to deflaudtheirem, sonto attaina personal goal.An example ployer.Non-shareability is lesslikely in is therelationship betweenapassenger and Collusion collectivist cultures. a taxidriver.Theserelationships arebased Wherea riskof fraudexists,Anglo.

Bondand Wang(lg83l contend on equity.Thereis balancebetweentne Saxoninternalcontroltextsrecommend thatthereis a Chinese preoccupation with inputsandgainsof eachpartyandparties separation of dutiesto conuol this risk. maintaining socialorder.Thehierarchical canbargainfor theirselfinterestbasedon Thisrecommendation is basedon the as, stucture of Chineserelationships which universal andimpetsonai standards. sumptionthatemployees will not collude underpinssocialorderis fundamental to ConstructedTies.Thisis morethan to commitfraud.Separation of dutieswill Confucia!socialphilosophy.

Thereis con, an impersonal relationship but it is not as notbeaneffective internalcontol in oversensualacceptance of differentialaccess stong asa naturallyoccu ing tie. There seas-Chinese companies because employ, toresources, dependingon rank,andqual, is a strongneedfor reciprocation because eeswith fraudulentintent may still be ity is boundby responsibilities. thereis an expechon of meedngagain Iikelyto collude.

It doesnot meanthat thereis no in the future.Partiesto the relationship ReddingandWong(l986) explain conflict over resources.Unlike Anglo. mayknowotherpersons in common.The that althoughthe familyis the mostcenSaxonstrategies, ovetseas,Chinese strate- most popularsrrategyfor sfengrhening ra-lof all the collecrivides to a Chinese giesto dealwith suchconflictsavoidcon. thistie is to deliberately increase socialin- person,there are concentriccirclesof frontationand openconflict,relyingon teractionbetweentwo partiesthroughgift othâ&#x201A;Źrallegiances, includingthoseto co. indirectlanguage, middlemen. face-saving giving,invitationsto banquets,and the workers.Rightsandobligations dilferde, strategies, a longrangeview,andflexibil- like. pendingonwheretheindividualis in each l t y { C h i a o1,9 8 1 ; B o nadn dL e e ,1 9 8 1 ) .

Ho and Chiu (1994)exploredthe circle.

Hwang (1983)has developeda complexity of individualism, collectivism, As ReddingandWongexpiain:"ln three-pronged modelto categodze inter- and socialorganizationin Hong Kong. sucha context,multiplestandards of mopersonalrelationships ln Chinesesociety Theyfoundthatvoluntaryrelationships are raiity may well operateand be seenas which reinJorces thestength of familyties: gainingascendancy while reiationships perfectlyacceptable.

Dutyto thecommu, Natunlly Occuffing Ze.eRelation- basedon bloodandmariagetiesarewan. nity at lalge,basedon someuniversally shipsamongfamilymembers arethemost ing.Howeveqtheycategorized thesevol- agreedmoralprinciple,is replaced by ethimportanttiesin Chinesesociety.These untaryreiationships, includingrelationship icsbasedon takingeachsituationandin. ties governthe rulesof socialexchange amongco-workers. asnaturally occuning. terpretingit accordingto looselyformuandresource distdbutionin Chinesesoci- Thisis consistent with theflndingsin Tai- latedprinciples of /?n (or human ety. The guidingrule is need;members wan, and includedties with family,co- heartedness)-there is no abstractstandwith workingabilities havea dutyrostlive workers,andfriends.Theyexplained it as ald bywhichto resolvetheconflictofval. for resources to satisfythe needsof each a consequence of societalmodernization ues-thus the applicationof multiple familymember.Familymembersarenot ard obsewedthat althoughnaturallyoc, standards in dealingwith peopleis not necessarilytreatedwith benevolence. cuffingrelationships keychatgingtheydo morallyrepugnantwherethestandards are March-Ap.tl,/May.June 1997 | TheAsianManaget

2l

set accordingto relativepositionsin the Companies Chinese asControlin OveBeas HowLoyaltyDevglops concentriccircles".

To Become Nudure doctrine,a person UnderConfucian dutyto theirfam' oweshisor her greatest Cullural Tendenc-y practiceof em' tofom In-Groups ily.TheOverseas-Chinese ployingmanymembersof the samefam' ily (Reddingand Wong)simultaneously Iniliatepolicies ulilizedisplayof It givesa conuolstrengthandweakness. highlevelsof alignsthe loyaltydue to the familywith loyallyto In-Groups I the duty due to the employerbut it also presentsan opportunityfor collusionas Mgt Paternalistic familymembershavea greaterloyaltyto lapid,compassionato oneanotherthanto the employer.

Membersof the samefamilywho intentarelikelyto collude havefraudulent to commitftaud.If membersof the same functions, familyoccupyincompatible then the possibilityexistsfor fraudand a geat concernwith protectingthe face seNativecultures.Ho and Chiu (19941 of others.The ChineseCultureConnec' noteda naturaltendencyfor employees beingableto hidethe ftaud. in-groups.

Emvaluesiden to createworkplace-based If it is in the family'sinterestto de' tion (l987) studyon Chinese tum to ployers this tendency cannurture value.Accusinga because of somegreat tifiedthisasa Chinese fraudtheemployer of fiaud will seriouslydamage the workplaceinto an in-groupandinitineedof the family,then familymembers colleague andmaydam' atepoliciesto enhancetheloyalryA high to de- the faceof that colleague it to bemorallyacceptable consider dueto thedis' levelof loyaltyto thefirm will minimize where agethe faceof theaccuser in thisinstance ftaudtleir employer would play of disloyaltyto the colleague.As the riskof ftaudby employees. suchactions in othercircumstances in Overmanagement Paternalistic Wilson(1970)states:"Loyaltyto other not be considered.

(East Asia Analyti' companies hasfocused on membersof one's$oup is the society's seas-Chinese Whilethisdiscussion may Wongl valueand this loyalty calUnit, 1995;Reddingand in'goup most outstanding thefamilybeingamoreimportant firm.

It goto the be usedto enhanceloyaltyto the thatfriendsandrelatlves thantheflrm,therecanbeotherin-groups requires comp0nents. lengths Lohonortheirobligations hascaringandnurturing thanthelirm. extreme whicharemoreimportanl personis a This careand protectioncan take The disloyal of morepowerfulin-groups ro oneanother.

Theexistence supponof theeducatheformof financial ls morelikelywhenthe firm is ownedor h a r c ^ n u , i t h ^ , , 1 F . a " children,palmentof Hence,thereis a greatdisincentive tion of employees' by a non'Chinese. managed andhisfamcom' hospitalbillsfortheemployee in Overseas'Chinese In instancessuch as these,the to whistle-blow employeddurily, keepingthe employee approachto separationof panies.

Anglo-Saxon based andpayingbonuses ing recessions, in controldutiesmay not be successful not of the business; on the performance ol non' Intemal Control Alternatives in the assumption Iingfraudbqcause of the employee(East the performance Cornpanies Overseas-Chinese collusionmaynot hold.

Internalcontrolsin Anglo'Saxon AsiaAnalyticalUnitl. andWongobseNethatthe Reddlng ftom applying countieshavedeveloped Whistle-Blowing is prefenedby management based on theory. paternalistic notexplicitly The finalcomponentof the Anglo- bestpractice "in harmonywith the asit is is whistleblowjng: The sameis true for Overseas-Chineseemployees Saxoncontrolsystem reportingftaudulentactivitiesof other countries.Theirinternalcontrolsshould v a l u e so f r e s p e c ft o r a u t h o r i z a t i o n , Maly employanddeference. in Overseas Chi- conformism, Whistleblow' bebasedon bestpractice to management. employees eesappearto be seekinga familisticcon' assumptions nesecompanies. ingalsoreliesonAnglo.Saxon loyalty theory text andto bewillingto exchange Wehaveusedcross-cultural an em' Expecting abouthumanbehavior. internalcon' for protection." is to explainwhy Arglo'Saxon ployee thata colleague to tellmanagers Staffloyalryis maintainedbY em' requires, hom an trolswere not suitablefor Overseas-Chi thecompany defrauding ployment which emphasizes The same cross-cultural nese companies. perspective, to the employee .decisions Anglo-Saxon loyalty fargreaterthan and trustworthiness why Overmay be used to explain is theory society which moral duty to have a internalconfolsaresultable in Westernfirms.Deyo(1983)obseNed greaterthan his moral duty to his col- seas'Chinese that kinsmenor closelyffustedpersons companies.

Ieague.Schwartzdescrlbedthis t'?e of for Overseas-Chinese "egalitarian to top positionsin Over' wereappointed as com' to society moralduty Lowerandmidcompanies. seas-Chinese Loyalty as Control have countries mitment." Anglo-Saxon tendedto be intemally havea cultural dle management Chineseemployees greateregalitarian commitmentthan d0 who entertJlecompany Persons andto display recruited. tendencyto formin-groups countries. the overseas'Chinese were oftenhiredfollower levels at the in'groups. of loyalty to these high levels lack of egalitarian In addiLion to the bYoustedperlowing recommendadons and con' of collectivist This is a feature have the overseas.Chinese commitment,

+

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TheAsianManaget I March.April/May'June 1997

I

sonswithin thecompanyor familygroup.

Staffloyalffis nurturedby topmanagers maintaining controlof decisions con. cerningbonuses,pay increase,and employeediscipline.

Personal loansarepro. videdby the companyto employees and in ofltle.jobsocialac ioinrinvolvement tivides, suchasfestivals andweddings.

A paternalistic manager shouldalso be awareof any familyor otherin.goup problemswhich an employee has.Rapid andcompassionate actionon theseactons mayserveto minimizeconflictbetween in groupandworkplaceloyalties.

Loyalstaffwillserve to minimizeme riskof fiaudulentacdvities by employees.

goup membership is not considered usu. agementof the companyasmembe$of allywhenassigning dutiesto staffinAnglo, tjle new generadon srrugglero gaincon.

Saxoncompanies.

In.group membershipsuoi of the familyandthe company. must be considered when assigning du. iles in Overseas.Chinese companies.

To Documentation assignincompalbletasksto peoplewho Anglo,Saxon internalcontrolof havea higherloyaltyto oneanotherthan documentaLjon techniques, suchasorganitheyhaveto the firm is a risk.Manasers zationchartsanddocumentflow charts, needLobecognizanr of in-group member are unlikelyto adequately describethe shipswhenassigning tasks. control systemin an Overseas-Chinese famiiycompany.

Any documentation sys.

PotentialProblemsand Dangers temwouldhaveto recognize thatresponTheChinese management stylemay sibilitiesareoftenattachedto individuals, lead to employeedissatisfaction, rather not to thepositiontheyfill.Informalcom, thancohesiveness.

Deyo(1978)studied municationexiststhroughwhichauthoriSingaporean industrialfirms and found zationscanflow.Suchthatin-groupmemthatsupervisors in Chinese fumsfelttheir bershipsimultaneously givescontrol Contfol of SensitiveAssets authoritywasinsufficient for theirlevelof sfengtlrsand weaknesses.

Anglo-Saxon All membersof the familytend to responsibiliry Lack0f effectjve powerled documentation techniques maybe modi work forOverseas,Chinese familycompa. t0 thembeingb)?assed in thedispute reso. fiedto incorporate thesefactors. nies.AsRedding andWongnote,,,[a]nex. luuonprocess. tensionof this tendencyfor familyand Thist)?e ofproblemarises ftomthe Implicationsfor Auditors company to overlapis nepotism.

Relatives centralized form of management favored In Anglo.Saxon companies. rhepri. arcemployed in keypositions."

Thisiscon. in Ove$eas-Chinese companies, but may mary duty of the auditoris to maintain sistentwith collectivist(Hofstede)and independence.

In Overseas-Chinese comconservative (Schwartzl valuesets. panles,an independent auditorwouidbe Someasseh,particularlycash,are unawareof the nuances surrounding vermoreiikely to be fraudulentlymisappro. Where loyalty yet an overticaland horizontalrelationships. priatedthan others.By maintaining con, understanding of thesenuancesis essenrides personal interest, trol of sensitiveassetsin the handsof tialto determining theeffectiveness ofthe because of a combinalrusredfamilymembers, the riskof mis. company's internalcontlolsystem. appropfiation is lowered. tion of cultural traits, An Anglo-Saxon auditorevaluating Overseas.Chinese lamilycompanies al Overseas-Chinese company wouldnote I o y a l t y p r o m ot ing alsotend to keepinformationsecret. the lack ofdocumentation, nepotism, loose strategies and inherent ReddingandWongstate"thereis much and changingresponsibiiities, eitherno secrecyaboutperfornance,and particu loyalty via family, the formalorganization chartor achartwhich Iarlyoverinformationbea ng on flnance 'separation of did not matchreal lines of authority need for andprofitabiliryTheseareseenasprivate (Redding andWonglandinconsistenctes duties' may no longer consistent ithatis,familylpreserues," witi betweenresponsibility, and access to in. collectivist(Hofstede)and conseNalve exist. formationof power.Thesefeatures would (Schwartz) valuesets.It mayleadto conleadan Anglo-Saxon auditorto reporta t-rolof cashandaccoundng records, being lackofinternalconfol but thisimpression assigned to thesameperson;perceived as mayDenconect. a maiorintemalconffolweakness in an alsosurface whena familymemberis emIf the internal conrolsystem is in.

Anglo-Saxon company.

Whetheror not it ployedin a junlorpositionin thecompany, tendedto safeguard companyassets and is an internalmajorweakness in an Over- yet is ableto takedisputes to seniorman- t0 ensurethataccounting datais accurate seas-Chinese family,thecompany depends agement, via the familyconnection.

The and reliable,then theseaimsmay be on who the personis. problemis exacerbated because the dis, achieved in a waycompatible with Over.

Intemalconfol ol sensitiveasse6 pute resolutionprocess is ofteninformal seas-Chinese management techniques. may be achievedin Overseas-Chinese andoccu$in thefamilyhome, ratherthan Closecontrol of managedaldeci. companies byplacing assets underthecon- in the workplace. sionsrelatingto the companyby trusted trolofa trustedfamilymemberor a trusted Familyandothergoup in-fighting Iamilymembers will ensurethatassets are employee. mayalsocreateproblems.

TheChinese de- safeguarded.

Trustedfamilymembers . sireto maintain"face"may leadto ten- shouldbe responsible for stewardship of SeparatingDuties sronsmountingwith little outwardevl- imp0rtantassets, includingcontlol of cash.

Wherea needto separate dutiesls denceof the problem.

If the familymembermaybe fusted im, stillperceived, appllngAnglo,Saxon sryle In-fightingis mostlikely to occur plicitly,theremaybe no needfor separa. preparation of dutiesis dangerous.

In duringa generadonal change in theman- tion of dutiesin this area.Separation of March-Apdl,/May-June 1997

The AsianManaser

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2

Manage'

Deyo,F. C., llgg3l,'Chinese popuMalaysia hasa largeOverseas-Chinese whenimplicittust does du[esis necessary and Work Commitmentin ment Practices played a cru' have not existsinceloyaltyto the flrm cannot lation.TheOverseas-Chinese Lim,L.Y.C.,and Perspective,'in Comparative ThaiPhilippines, in the to alwa)6ovenidepersonal cial role in business beguaranteed ln South L. A. P, (Eds.) , TheChinese havenot Gosling, These countdes Indonesia.

Iand, and interest.Whereloyaltywill alwaysovelAsia, Singapore 2, Maruzen Asia, Volume east thereis in Lhjspaperbecause beenconsidered ofa combiinterest,because ridepersonal Over Eastl,sia Analltical UrL].r,11995), isolating the culturalvaluesofthe no research nationof culturaltaits, ioyalty-promoting Overseas-Chinese communityfiom the indig- seasChineseBusinessNetworksin Asia,De' partmentof ForeignAffairsand Trade,Canby thefirm andinherentloyalty enouscommuniq/. strategies the berra. close reladonship, viafamilyor orier Geertz,C., ll993l. Thelnteryretation longer mayno ofduties needforseparation References: SelectedEssalE Fontana,Hamof Cutturcs: exist.

Bond,M. H.,andLee,P W H.,Il981l, UK. mersmith, of dutiesis alsousedin 'FaceSavingin ChineseCulture:A Discussion Separation Hofstede,G., 11980),CultureConse' andreliabil' andExpeimental accuracy of HongKongSludent. quences: ensure Study accountingto IntemationalDrcrences in Work information.The same in King,A. Y C., andLee,R. P 1., (Eds.),So' RelatedValues, ity of accounting Research and (Cross-Cultufal in HongKong,lpp. argumentis ffue here.If otherimportant cialLifeandDevelapment u 51,SagePublicadons Series: Me$odology Hong areasareunderthecontol of trustedand 288'3051,ChineseUniversityPress, BeverlyHi1ls.

Kong. is minimized.

H w a n gK. .K . , l l 0 S S ,B u s l n eOs rsg a n i loyalstaff,chanceof fraud Bond,M. H.,andWang,S.H., [1983i, working Patternsand Employee's zational where Theauditormustunderstand 'Aggressive The Behaviorin ChineseSociety: oJ aJThe Institute Sulletin in Taiwan,' Morale the mainin-grouployaltiesof employees Problemof MaintainingOrderandHalmony,' AcademiaSimca,56, 85'133 Liu Ethnotogy, Iie. M., (Eds.),Glo' A. P, andSegall, in Coldstein, 'Catego

Conclusion like other Internalcontrolsystems, interactwith both systems, management To theyoperate. peopleandsocietywhere assumeotherwiseandto regardinternal applicabie controlsystemsasuniversally how interTo understand aredangerous. it is impor' nal conuolsmaybe achieved, the societywherethe tant to understand andthesocontrolsystemwasdeveloped cierywherethecontrols)6temis to beimplemented.

Only from suchunderstand' ing canpredictionsbe madeof the likely of the contol systemin meeting success its objectives. is oneway research Cross-cultural At themacrolevel, sociery. to understand such as by researchers as undertaken we canfocuson andSchwartz, Hofstede betweencoun' anddifferences similarities by tries.At themicrolevel,asundertaken we can Wongamongothers' Reddingand IJIemacrofocusandadoptprin' fine.rune ciplesto particularinstances.

In this paper,we haveusedcrossto provideanunderstandculturalresearch ing of the theoryof internalcontrolsys' tems.This approachopensthe door for verification and for extension empirical and Anglo' outsideOverseas'Chinese Saxoncommunities.

on Aggession,{pp. 58-74), bal Perspectives Press, New York.

Pergamon

control lnternal intoract 3y!toms people and with both society where theY operate. To assume othorwise and to regard them as univeF sally applicable can spell the difference botween success and failure in meeting their objectivec.

Chau,w 1.,andChan,W K.,Il984l, 'A Studyof]ob Satisfactlon of Worke$in Lo' of Chinese,Westem,and.lapacal Factories neseOwnership,' TheHong KangManager, 20,9-14.

Chiao,C., [19811,ChineseSttategic pte' SomeCcneratP nciples'Papet Behavior: in honorof Professor sentedat a conlerence Clalemont,CA,USA. JohnM. Roberts, Cressey,R., lq53), Other Peo?le's Money: A Studyin TheSocialPsycholog/af ComWadsworthPublishing Embezzlement, Endnotes: pany, California.

Belmont, I Overseas-Chinese is a termusedto descdbe D e y oF, C . ,l l q 7 8 l , ' L o c F a lo r e m ei n otherthanthosein tie communities Chinese Case A Compalative Enterprise: Multinational Taiwan HongKong, RepullkofChina: Peoples in WestRole-Tensions of SupeMsory Study such counties andnon-Chinese andSingapore /oul' ind the ern andChineseFactoesof Singapore,' Indonesia, Thailand, asMalaysia, nal ol ManagementStudies,15, 308'31'7.

Philippines.

24

The AsianManager March'April/May-June 1997

zationTime as inde' L M., [985], pendentof The Numberof Conditon'Acuon 37, 8' Rrles,' Perceptionand Psychophysics, lo.

Informa' Accounting Nash,J.F.,I19891, 2"dEd.,PWSKent,Boston. tion Systems, T.w., [19761, Redding, S.C.,andCasey, 'Managerial amongAsianManagers'in Beliefs Taylor,R.1.,O'Connell,M. J.,Zawacki,R.A., Prcceedwsof the andWaryick,D. D. (Eds.), 36hAnnualMeet AcademyaJManagement ing,[pp.351-356],Academyof Management, KansasCity.

S. C., and Wong,G. Y Y, Redding, 'ThePsychology Organiza' of Chinese 119861, Bond,M. H., {Ed.J,fre tionalBehavior,'in Psychotogyol TheChinesePeople,lpp. 267' HongKong 2q5),OxfordUnive$ityPress, Indi' S. H., llq94l,'Beyond Schwartz, NewCulturalDimenvidualism/Collectivism: sionsof Values'in Kim, U., Triandis,H. C., C.,Choi,S.C. andYoon,G , {Eds.)' Kagitcibasi, lndividualism and Collectivism: Theory' Method, and AppticadonEICross-Cultural v.18,pp.85Series: Research andMetilodology Oal(5.

Thousand 1221, SagePublicadons, The ChineseCulture Connection' Valuesand The Searchfor 119871,'Chinese of Culture,'ln /ouf Dimensions Culture-Free \8,2, 143' Psycholog/, nataf Cross-Cultural 104.

LearningToBe wilson, R. W, 11970), oJChildren Chtnese:ThePoliticalSocializatian MassachuCambridge, ln Taiwan,MIT Press, 5etts.

'SocialOrientation Yang,K. S.,[1981], StuandlndividualModernityamongChinese dentsin Taiwan,'/oum al of SocialPsycholog/, 1 , 1 3 ,1 5 9 - 1 7 0 .

Professors Frafices MiIe! afid Afldrew Read are frotn LheUfiiaersity of Canbelra.

Community-Based Strategy for Consenrfiion of Caohai Wkgers can beprotectorsand beneficiaries

or destroyers andsufferers

aohaiNatureReserve (CNRIisone of the securifyof the LakeCaohaiwhich improvingsanitation of thevillage,develof the twelve natule resewes is the criticalresource basefor both peo. opinglocalLradidonal food,buildingin. locatedin Wumongmountain ple andthebirdsin the future.Why? frastructure andfacilides,andimproving areasin SouthwestChina,characterized 1.Marginalwetlandanduplandare seNicesfor tourism development.The by longhistoryof exploitation, denseand continuallyconverted into farminAland. short-termstrategyfocusshouldbe on p00rpopulation, variousethnicminorities, 2. Theyield in fishcarchiigradu enhancement of solidwastemanagement l o w e d u c a t i o nl e v e l s ,a n d s e r i o u s allydecreasing dueto overfishing. andtouristsewicemanagement. d e f o r e s t a t i o na n d s o i l e r o s i o n .

3. Farmersare comDlaininq aoour Communities within the naturereserve the waterbirdsdamagngtheircr6ps.

4. diversifyingfinancial sources; arepoorald liveonsubsistence.

Although 4. Morefertilize$andpesticides are Currently,CNR office funding eNllonment conseryation is imperativeto beingusedin vegetable growing. comesmainlyfTomtheprovincialgovern. their future development, it only seems 5. The increasing city sewageof ment and the IntemationalCraneFount o b e a m a n d a t eo f g o v e r n m e not t WeiningCity discharges to LakeCaohai. dation.Forsustainable development, CNR outsiders.There are many conflicts shoulddiversifyits financialsourcesby bet\/eengovernment andcommunityon Six-Potnt Strategy strengthening linlegeswith organizations conservaUon anddevelopment.

Increasing Afteran analysis of sfategicoptions, with similarinteresB andconcernslikp attention is giveneithercommunity-basedthe CNRofficemustemploythe follow. the FordFoundation o r t h e p a r t i c i p a t o r ya p p r o a c h etso ing Six-PointStategyto dealwith such conservation anddevelopment.

However, challenges in thenext fiveyears: 5. enhancing inftastructure and it is still a questionof how to harmonze facilities: relationshipsand interactionamonq l. undertakingcommunity.based * development of infrastructure ro people,economtandecology. conservation and development dealwith pollution; * development activifes: of roads;and * enhancingnon-farming The Caohai Nature Reserveand the ' skillsof promotionof facilities forresearch CNR Office: Challenges thevillagers; andecotourism. * encouraging TheCaohaiNatureResâ&#x201A;Źrve aDDroxrvillagers'participamately9,600hectares wasestablished in tion in the management of resoutces of 6. improving the capacity of the 1985 to protectrare birdsand wetland LakeCaohai;and CNR office: * rehabilitating ecological ' enhancing system.CNRis oneof themost the degraded land sraffmoralerhrough a importantwinteringareasfor morethan of LakeCaohaithroughreforestation and betterincentivesystem; 155species * offsettingthe human of waterbirdsin southwesr, soilerosionconbol. resources ern China.Meanwhilewithin Caohai gapby stafftraining,visitingresearchers, NaturalReserve, thereare more than 2. zoning CaohaiNature Reserve joint ventures,andnew staffrecruitmenr I q,000peoplelivingwirha densityof200 into both core and buffer areas ftom colleges,/unive$ities; aIId persons persquarekilometer. * strengthening the linkagewith Althoughthe CNR offlcesuccess. 3. developingecotourism localgovemmentunitsby improvement fullysustained secutityofrarebirdsin ne In the longrun, tie stategyfocus of communication. pastten years,theynow facechallenges shouldbe on beautifying rhe landscape, The CNRofnceis a key facilitator March-April/May-June 1997

me AslanManapet

25

ason intangible focusing Ienges butalsoto easilydrawattentionand bilirybuilding. suspects, management 0f CNR will make supportfiom outsideagencies. rural development 7. The approach abovemaybe ex- tainable.Integrated in the to help hingedon socialcapital-building tendedto othernaturereserves of naturereseNesIs a new form coalitionsand to build lobbying management in China.The CNRofficeis a power approach practitioner of community-based leading develop 8. The conservarion and Continu' anddevelopment. ment,ifsuccessful, candrawgovemment conservation maybe useful and internationalattentionto help the ing effortson the approach in China.espesuchaszinc lo otnernaturereserues CNRofficesolveotherissues area. problems. in Wumong mountains pollution cially meltingandsewage Inte$atedconseruation anddevelopmentis a lessonlearnedflom all over Postscript A year after this strategywas Thisap. rhe worldin rhe pasrdecades.

Humu allhe Corc Research for CNRconsid formulated conservation and proachis alsonecessary based {thrua Management Communify proposed, Caohai Project and the ReportJ urgency, feasibility, in the ering its importance, developmentas a main strategy and p r o v e d s u c c e s s f ui ln s h o w i n g t h e factorsof strategies capital- andcontrollable social nexrfiveyearsunderscores and interlinkingof povertyalleviationand theopportunities-strengths buildingto link povertyalleviationwith combining and the conservation strategles0p- naturalfesoulces Thisis a opportunities-weaknesses conservation. naturalresodrces c o m m u n i Iby a s e d . w i s d o m o f t h e core and Zoning CNR into both tions. s:jategyof Huzhulhelpeachother).

It will bethesubiect bulferareasshouldbe tle prioritysllat inte$atedapproach. ln the next fiveyears,the CNRof o f a n i n r e r n a t i o n ac lo n f e r e n c ien fice shouldapplyits community'basedegt. puts D e c e m b e r1 9 9 7 s p o n s o r ebdy F o r d strategy to Thecommunity-based strategy anddevelopment conservation itsmissionbasedon thefollow villagersinto the coreroleof kingprotec- F o u n d a t i o n , I n t e r n a t i o n a l C r a n e undertake a n d R u r a lD e v e l o p m e n t and F o u n d a t i o n torsof the Caohainaturalresources, considerations: ing Center them to show their concern Research andtheirlivinSbase, encourages l. Theviilagers CaohaiNatureReseNe,cannotbe sepa in environmentprotectionthroughintetal and development. Dh a, ., cr yi n' 4l rt , rA,r rnr"R* , .t,'ntrh,/nr C Lt t\ Ui a Rn t. \\1 t "r ct ht tn, ' ilrt t rRl t u t i rated.Theywill continueto useandman- gratingconseruation to o t C , . . , t , r l h u D r L t n t ; C i l v l \ l c F r t A t l , l r p ' . andof the reserve. Namely,connectingthe conservation agenaturalresources capa' <rdrcknt@elephnnl.istiV.vn .(11>. emphasizing and thepovertyalleviation, Theyplaya keyfole in conservation development.

2. The villagerswithin the reserve areaarepoorandstill liveon subsistence. and improve' Theydesiredevelopment Thesede mentof their livingstandards. siresmayconflictwith the policyof the SUBSCR'AE NOVYAND OBTAIN FREE and reserve.An inte$atedconservation ON SCHOOLS INFORMATION -tsolrr! could be exercised a Lotr3hhotuulh approach development U3A -rcEsMA :1r_o on BS JAmosftrk conseNation to solvetheconflictbetween atsaruch lBeDrler anddevelopment. :r Bo{oi aBqanl -1.,;esie lsouthrmrkr Mrll()i alsc Prn 3. Conseffationand development -rsrerlii-!

-r lNsEAD f chicaio process. lstrthcLvde Villagers could be ITHESELrS long-term is a s :t Darden :l -t -r 'r Ronenlam Dislance protectors or destroyers Ceorgebwn andbeneficiaries F a H,-;d Lemins :l TsM It is essentialto motivate and sufferers.

I l''-" I9'^.' ausrmlAlra Nol ;iL"':"' "",..,t:"'LiU:i,"." peopleto takea positiveroletowardsena Mtr 18 {nurj. ;;l::^'-' Worldwide protection to establish and vironment ' 250+ Pages .i \1.,hn,h1".rr'E' ,u| m e e;.. " ' j : i " I , , , . policy fiameworkand politicalsupport. i;:;"f), I t,.r .

1HIL5d.7 E Prus R.dit.E Top 20 s.hook of the lo' Withouttheactiveparticipation , 1N r n r r llmpe ",..oi tt MBA publidijon, anddevelopment conservation ! calpeople, 1c ,; i.. p rh. nBA cm.r G!id. h couldnot be sustained.

Intuat Butnt\,htnt 4. The CNRofficewith the helpof EUROPE _twinwien JCvATBull.tin llnp€ml I'nl,hr\\trr\\t,ta hasgainedsomepocketsof suc outsiders 1rd.rrr.' dootrm@6 onr.t d dar cessworking with communities.These -1 '97 makeits stafffeelmorecomexperiences :t colat Edition (Sprins94: Ust 15.95 Annu.l (spnnr i.ll 97): Us$lo 50 I I Y6: US$7200 -1Ma{erc.rd Visa :l fortablewith theirfuturework.

Add US$300 t{ il(,o. posr/pa.k.

(US$5.00P.. &ir,onin Europr).

Ll]Iallnafllrlll polluLion ofweining 5. Thesewage Seid .he.k/bink dni/.redit 6rd lor City is beyondCNR'Scontrol.The CNR paFbl€@: USI officecannotsolvethe pollutionproblem The MBA Career Guide without the supportof localgovemment 46 Delan€eyStreet. bureaus. or evenhighleveladministladve Unit€d KinSdom integrated 6. Community-based Faxt+14\0) t7l 767 l<Al isnotonly anddevelopment conservation atM/1/4 FREEINfOR/U TlONtV ruat€ ONIYTO/MBAGUIDESuascRla€Rs its chalapproach to address a practiced

conservato promote community-based tion and developmentactivitieswithin of the cNR officeit' cNR. Thecapability factorto suc' most important is the self ceedin this mandate.Supportftom cenand localgovernments, ffal government Fur' andGEPAandGEPBis alsoessential. or inthermore,fundsfrom government for imis imperative agencies ternaLional plementation.

Moreover,mobilizationof to sus' thevillagersis definitelynecessary tainefforts.

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TheAslanManaget March-April/May-June1997

PBECPondersChina andJapan Thepolitico-economic viabilityof the Asia-Pacific will dependon how China,Iapanand the USwill interact A Bit of History The Washington,DC Conference delivereda paper,"Management EducaThePaciflc Basin Economic CounMy fifft directexperience with tion for the 2l st Century:Towardsa Valcil {PBEC) hasbeenaroundthirtyyears, PBEC wasdudngthe29thInternationalues-DdvenParadigmfrom Asia', which founded througha "settingup" meeting General Meeting{lGM)ln Washington,undeffcoredthe humanresources develin April 1967in Tokyoofitsfivefounding DCwherePBEC issued a mjorpolicypa. opmentrequirements of managing organimembers: Austalia,Canada, New per,"lmplementing Japan, FreeTrade andlnvest- z a t i o n si n t h e c o n t e x t o f r e g i o n a l Zealand andthe UnitedStates.

Then mentin thePacinc Region".

AIM presi, cooperation.Through examplesof Asian knownasthePacific Basin Economic Co. dentFelipe Alfonso, Director General for management, Alfonsounderscored that operation Committee (PBECC), its nrst thePhilippines MemberCommittee also Asianbusinesses felateto threec3: com, AnnualMeetingchaired

by Shigeo munities,cybe$pace andculture.

Naganoof Japanin February1968, That perspective led me to give brought prominent together andinfluenparticular attentionro thePlenary Sessjon tialbusinesspeople topioneer theconcept on China and Japan.US PresidentBill of interdependence, uginga new,liber. Two key questions Clinton,afterall,devotedsometwo-thirds alizedeconomicsystemwhich could of hiskeynoteaddress pondering over on USpoliciesand worth makercsources morewidelyandequita. forecasts of developments in thesetwo weno: blydistributed, facilitating freeffadeand counties. investment through openmarkets, movWill Japan'r political ingswiftlyrowards regional cooperation.

Chtna and Japan system enable it to proIt changed itsnametoPBEC in l 971and My conference notesleadmeto the Oe yearafteradoptedthe PacificBasn vide leadenrhip in the conclusion thar the polirico.economic viCharteronIntemational Investnent,the ability of the Asia-Pacific in the next cenregion in the 21st centustmultilateralstatement of its kind istuly will dependto a largedegreeto how suedby theintemational business com- tury?

China,Japanand the United States1rrill munity.Torespondto growingneedsof interact, staftingnow. How their differ.

What new opportunideveloping countries, theRegional Mem. ent politicaland economicsystemswill berCommittee ties will be crcated by wasestablished in 1975 facilitaterheirworkingtogether, andper. underthe leadership of the lateJose Ghina'r Plan, erpecially haps,reinvent their roles vis a vis each 'Jobo"Femandez ofthePhilippines, even other,will affectthe regionbdeveloping for the non-coagtal le. as the Philippines wasadmittedas a economies and emergingmarketsin this "Member Committee" onlyin 1992.Chi. gions? ffansitionperiod.Thismakesit imperative neseTaipei wasadmitted MemberComto unde$tandand appreciatethe undermitteein 1984;HongKongin lggl; and Mng culturalvaluesof thesesocieties. thePeople's Republic of Chinain 1994.

Ishikawaiima-Harima HeatTIndus, March-April/May-June 1997 | fhe AsianManapet

27

"lf ambitions? with international triesChairmanandCEOKosakuInaba's getfor Year2010.Thenextfifteenyears company economic modernization. we donr keepupwilh polidcal. wordsstill ringin my earswhenhe said will seethroughsocialist "One way of ridding andtums,we may tvvists for China's andtechnological candidly: iapan's Strikingwas his advocacy "Today asthe ten- verywell getleftbehind",he says,leading in WTO: economyandsocietyof theirstagnation membership becomes t0 the welcomeinnovationintroducedby of world tlade integation a creadency them is to realize revitalizing and (l ) to havesubthemes: under PBEC-Philippines trade cooperation the more obvious, shifting tive sociery"He advocated political, infor' economic, and shifting which is the multilateral trading system focusftom learningwhat is only taught the (2) in the Asia-Pacific; shouldbe mationlandscape beingperfected a social climalein whichin' developingand ro-crearing the unfinwill getben- tradeand investmentreform: dividualsare thoroughlyimbuedwith of mutualbenefit.Everyone growth: everyone will gethurt." ishedagenda;(3Jtranscending andcreativity".Hesuggests efitsor otherwise self-reliance of ecoand socialchallenges the rebuildingof the socioeconomicThe differencein politicalsystemsand managerial dynamics of and nomic development; hinder mutual global perspective, ideologies is not seen to i.e. fuom a {41 framework "next-generation" goes competitiveness. international He beneficial economic cooperation. regulations formulate "ln pursuingeconomicbenefitsfor Recognizing the strandsof insights terms on, thatwill determine andstandards IGM, ChineseMce in the 29th of futurecompetition,evenashe calls mankind,all of usshouldmakeconffibu' on China "trump and while re- PremierLi Lanqing HongKongChief asthe card"for a tionsto seekcommonaspects deregulation insights Chan,bothshared differences, conductmutualpro SecretaryAnson economytoday,and specting robustJapanese andseekmutual on how Chinacancontinueits transition role with motionandconsultation underlinesits collaborative i nn . to a globaleconomicpower Discussions overseas countriesasbefittingits status u n d e r s t a n d ianngda c c o m m o d a l i o also on lapan'seconomicrestructuring to achieve common development." focusing order communify, in theintemational plenarv sessions. rhe came into the panelisS The during on its economiccontribution.

Japanhas afterhissuc FidelRamos, President the international on ChinaandJapanposedmorequestions to work on increasing of APEC last year, worth cessfulchairmanship Two keyquestions of the Yenbut sinequanon than answers. acceptance themomenhowPBECcansustain sfessed would be openingup Japanto the out' ponde ng overwere: of strategy politicalsystemenable tum andcitedthe polevaulting Will Japan's sideworld and domesticderegulaiion, President Corazon Former provide in the Philippines. leadership in the region it to efficient and con' well as developing as on empowAquinosharedher reflections venientmoneyandcapitalmarkets.Fur the 2l st century? and economies, ered and empowering will be creglobalinteraction, Whatnewopportunities thermore,to increase equity. for the $owth with is es' atedby China'sPlan,especially individualexchanges international par' With morethan700delegates regions? would be de' non-coastal sentialbut a prerequisite onecanonlybe0p' ticipatingthesessions, velopingan informationinfrastructufe, timisticfor morethan 700 opportunities the basefor the creationof new indus- The Manila Conference tran' andpurse'friendlyPacific with the 30th IGM heldin Ma- forapeopletries.

"Pacificin sltlon. rheme of nila this Mav. the ChinaCouncilforthePromotion Busi' AdapLing to a Changing of InternationalTradeChairmanGuo Transidon: discussions MorL,ccC,:!i,MBM'95, is Deplly Dir.ctor Cettrcl unleashed Dongpo,0n the otherhand,tracedthe nessEnvironment" Mernb.rContnitfeeaf thePtrcific of lhc Philippines transformational BasinEcornrnicCotlttcil(PBEC)a d Ex.cutit)e in reformandin theopen' on opportunity-seeking, breakthrcughs Chair Dir.ctoroltheAIM Sci('tttiftcRcsenrch leadership.

Conference Foutldaltotl ing to the outsideworld of China,and economic <nat'ed@airn.eiu.ph> of theNinth Five' manRamonR. Del Rosario, ). I temet Address: discussed the features Jr.raisedthe 6(sRF will thePacificregioncon andSo' corequestion: Lconomy YearPlanforNarional placeto be if you are a to be the Long Term Tar' tinue andthe cialDevelopmenr

inlhe21stCenlury.' ihetopicof'Japan Panelists discuss - (LtoR)KosakunabaCharrman &CEooflshikawaiimaPresidentof Industries, I\4ichael fumacost, HaimaHeavy Aziz lrstlJlon'E. DaloSeriRafdah theBookings Trade andInduslry S.R I\,linister olIntemalional lValalsia's 8usnessGloup Cho,Chairman of the Hyosung Standing Advisor of the Ambassador l\,lichio MizogLrch, Prcsdentof andClydeV.Prestowitz, Kajima Corporation, nslitute. theEconomic Strategy

AIMPrcsAlforso the29lhlcll. afdMsCerdunng

lhe AsidnManaeet March-April/May-Junelg97

(alpodium) isloined by Feat!.ed speaker GuoDongpo (L to Rl Ambassador Chas.W whoinclude oanelists Jr.,Charmanof Proecls nternational Freeman, ofthe Haruna, Chaiman ofiheBoard Associales, Kazuo of Km President corpoatonDuck'Hwan Marubeni Oksenberg a Group.

Dr l\r'chel Ssangyong BLsrness lor Internalpiai at Slantord s nslitute SeniorFellow Wrde Chairman ofWorld Studies &Dr Hemutsohmen Ltd. Shipping Agency,

Sustaining TheBoom After twentyyears of boomsand busts, the upswing seems too good to last unlessa systeminvolvingreformandvigilance is put in placein the Philippines

New Tiger of Asia? ing easierentryfor firmsinterested in set, countrysustainits cufent gtowthrate?"

Theeconomic scenario forthephif ting up manufacturing facilities,or better A gowth rateof 6.5%.7.0% is modestby ippineshasneverlookedsopositive.Eco yet, their regionalheadquarters.

At the NIC standards, but if it canbe sustained, nomicindicatorssuggested GNP$owth startof 1996,President FideiRamosas, the Philippines will ioin the NIC rank. in the6.5"/.-7 .0%rangeoverthelasttwo suredinvestorsthat they could',livese. (SeeDiagram l.) yearsandhigherincomepercapita,which curein the knowledgethat theyarenot a recent NEDAreport places arUS$1,209, livingwith policiesthatwill changeover, PositiveEvidence or at the "vision2000"goalofthe philip. night, with iaws and contractsthat are Thegovernment creditsthecoun. p j n eg o v e r n m eonflU S $1 , 2 0 0 p e rh e a d . vulnerable to arbitrarypoliticaldecisions, Lry'spresentsuccess andits optimisicfuw h i i e r h e P h i l i p p i n ree) m a i n s or with regimesthat will be wrackedby ture t0 the structuredeconomicreform heavilyin debt.banksarenowwillingto upheavals or suddenshocl$."3. agendaof the Ramosadministration.

The lendto the Philippines again.As of mid.

Themajorateasofboomarearound architect of wide-reaching financialreform 1996,Philippinedebtwasin the formof Metro Manila,Cebu,and Subicwhile is RobertoDe Ocampo,Secretary of Fibonds(12.3%), whilemediumandlong. Mindanaoseemsnot faraway.Thepeace nance,who hassunnypredictions in the termborrowingrepresented 40.6%of for. a n d o r d e rs i t u a t i o ni n l e s o u r c e - r i c h Philippines's future.Ramos hasthreeitems eigndebt,mostiyusedto fundinftasfuc- Mindanaoappears to havebeensolvedin on his agenda: economictumaround,soture projectsthroughthe build.operate. the short-termand investorsmayreallo- cial reform,and reformof the elecroral (BOT)scheme.' transfer groMh catetheir resources Economic accordingly.

Invest- system.De Ocampopointsout that the is finallyexport andforeigninvestment. ment is discouraged in the hea\ryurban Ramos administration hasbeenfast-track. driven,contraryto theconsumption-and centers andencouraged awayfromMetlo ing economicreform after solvingthe government-ledgrowth in the period Manilasothatgrowthcanbe distribureo power outage siruation of theearlynine.

1986,1989.' in the region. ties (Ramos's first majorinterventionas Creditthis boomperiodto struc.

Thesereforms,asfar astheyhave president).

Privatization of manygovern. ruralreforms, massive investments in in. beenimplemenred. haveproiecred a posi. mentassers is underwayandreforms in ftastructureand deregulation of key in- tlveperception on theinvestment climare theinvestment andfinancial markers are dustries(powerand telecoms,for in- in the country bringingback investors expectedto bring in furtherincome. stance), andthe liberalization of thephif ftom the regionandfromJapan.In a re. Ramos raisedcapitalfirstthroughthesale ippine financialmarket.The country's cenl Eutomoneyconference on the phil- of suchgovernmentassetsas Philippine formerinwardorientation,asevidenced ipplnesin Makatiin September 1996,sev. Airlinesandpublictelephone utilityPLDT by imporrsubsrirudon, rariffprotection, eralspeakers notedthat queriesfromfor. throughthe AssetPrivatization Trust andsubsidyof tie morevulnerablesec, eign investorschangedradicallyfrom a {APTI.Thishasin parrkepttIe counby's tors,suchasagriculture, hasbeenreplaced yearor two ago-from "Whenis the budgeton a surplus.Saieof otherasse6 with tradeliberalization measures aliow- nextlikely coup?"to "How longcanthe in the utilitiessectorssuchaswaterand March-April/May-June 1997 ) TheAsianManaser

Zg

economy. electricity(the NationalPowerCorpora' ance.Thesealsohappento promotemore nomicrealitiesof a borderless protectionism andeco' taxes,and will increasetax in which old style the Metropolitan progressive tion bid unsuccessful, anacharecompletely succesful)are revenuesrhat will fuel the counuy'sin. nomicnationalism Worl6Systems andServices growth.

Mllegassaysthateconomiclibronistic."5 thissource vesfnent-ddven on thehorizon.butadmittedly Externally,Ramoshaspushedfor an eralizationis the key to globalcompeti' of eamingsis short-term. the legisla' program for tivenessthroughdismantling exportorieDtation that is competitive DeOcampobown reform to foreign invest' producers tive and financial barriers and invitesforeignbusi' hasthreeelements:financialmarketre- local could"el andlong-term equity ment,suchthatthePhilippines form,fiscalreformwith the Comprehen- ness,marufactudng andbankingre. investments.Financialand investment fectivelycompetewith HongKongand siveTaxReformProgram, asa financialanduadingcenter Com- refolms are raisingfundsflom intema- Singapore andExchange form.4TheSecurities and the capital tional and domesticsoulces.and are in EastAsia."6In the meantime,exports missionwasreorganized "the and andinvestrnents, two piilarsof Philto becomeself-regu- toutedto be the keyto a permanent marketsencouraged recoveryInvestmentpolicies ippineeconomicrecovery"postedrates lating.A centraldepositorysystemhas sustainable up theclearingperiodfor stocks, now invite foreigncapitalfor build-oper- above20%,closeenoughto the growth speeded Foreigninvesanddebttradingis alsoin thewor}(s.Laws ate-tansfer(BOT)projects,parmerships ratesof its NIC neighbom.T to the torsarebdngingin directequifyfundsfor while revisions werecreatedor modified andioint ventures. andincentives realestate,infrasuucture, Act are easingentry manufacturing, to lurefurtherportfolioandforeigndirect ForeignInvestment and are beButsome finance.and otherservices. in general. with increas- of forcigncompanies investment{FDI).Together ginning counw's advantages to realize the on foreign capital globalization the argue tiat dependence of nnancial markets, ing center of tie tuiain its location at the Philippines vulnerresultthemoneymarkethasbeenflooded is likelyto renderthe of as abundant source Pacific region and in the volumeof with mofe foreignmoneythan it hasever ableto suddenchanges labor.s andhighly-skilled poli- foreignexchange.

Fora while,the Philip- highly-educated seenbefore.Financialliberalization at thestartof 1996werefor by expansionary mon- pineswastoutedasthe next onein line InvesUnents ciesare supported "biggerand longerin' for a downfalllike thatof Mexicoin early projectswhich were etarypolicywhich will helpdecrease terestratesandrenderinvestmentmore 1995,a pesocrisisthat triggereda mas- termin nature,which meansmorecapicapinl-intensive year"samulai" slve flight of short.termfunds and the talinfusionin high.value, Seven-to-ten competitive. energy such as manufacturing, ventures, of the financial market. currently-availablecollapse bondswill supplement "prophet acfix€d fypes of investments," andother Fromthethink'tanks side, 9l-dayand365-daytreasurybillsandocof Tradeand casionalthree-to-iveyearbonds,to finance of boom"BemardoVillegasof CRC-Uni cordingto the Department in semi' Thereareopponunities the many medium-terminflastructure versity of Asia and the Paciflcsays that Industfy.o nr^ip.t< anmino in andoil refining,espe' energy, t}te "new eco. conductors, Ramoshas"recognizled]" In the bankingsector,ten lully' ownedforeignbanl6{ifreformcontinues, more)were allowedto put up shopand ' Ob$rni and haveup to six branches.

Jointly-owned Phlllppln. G]lP, R..l groirr0r (%) fid rrf.tl,on RiL (99): l99l.1gO0 ('rdtc&r e |b. {at-ltal domesticbanksno longerneeda license for eachbanktheyaresettingup.

On the fiscalftont, the implemenTaxReform tationof the Comprehensive govemment in more Programshouldbring revenues thatwill supportcapitalinvest' mentglowti oncethesalesof govemment :.] assetsare usedup. The comprehensive Tax ReformProgramis gearedto widen the tax baseand improvethe country's :"] poor collectionrecord;implementedin it hascunentlyadopteda mix of stages, that ad valoremandexcisetax measures such"sinproducts" asbeer will "penalize" Thedismallow savingsrate andcigarettes.

I gap}threatens thein. {savings-investrnent vestmentenvironment,and not enough existto encoulandprograms incentives saving.More domestic and business age of taat progamsarein the pipelinethatinclude pension plans, providentfunds, andinsur-

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me AsianManaget March-April/May-JurcI 997

ciallythe lattersincethe demandfor oil in the Philippines is highandincreasing.

Steady---orJust Lucky?

A contrarianview is that the phif ippinesstill exhibitsthe ffademarkof a boomandbustcycle,or lesscharitably, a "yo-yoeconomy", andthatRamos,known as"SteadyEddle,"is also"LuckyEddie,' sincehis electioncoincidedwith the upcycle.The highlypositiveoutlookon thePhllippines in rhe I ggosin DiagamI is mitigatedby a pictureof actualGNP growthin the lasttwentyyears.RealGNp $owth has peakedand trougheddue to at leastthreeextemalandinternalpolitical and economicshock. (SeeDiagam

Diagram 2 TheBoomandBustCycle GNPgrowh|atâ&#x201A;Ź(%),1985tricas

Theearly1970sshock dueto the (10) oil cdsismanedthe economicpoliciesof 70 72 f4 76 78 80 82 84 86 88 g) 92 94 96 the early Marcos administration.The sarc.r fhddd sbt dc.t coc!|don aod gradualrecoverywasfollowedby another plungewith thedeathof Senator Beniglo Aquinoin 1983,Marcos's presidential op. ponentin the 1972elections,who had nvestment,overseas workel temittances, professions) in the medium-term,thismarbeen imprisonedandsentsubsequently andforeignloans,he alsoseesthatgrowth ketwill soonbefloodedwith cheaper labor on voluntaryexile to the UnitedStates. may be too relianton somesecto$ {fi- fromVietnamandCambodia.

Therewas a slight recoverywith the as- nance,feal estate,power generation).

TheNGOsectorandsomebusiness censionof Pres.CorazonAquinoto the Moreover,while it doesseemthat the groupsarealsowary that rhe Philippines presidency followingtheEDSAMuch and manufacturing sectoris growing,thewor- hasgottenoutof theboom-bust cycle.Funthe flight of the Marcosfamily to the US, tisomeincreasein the tradedencitmay damental to theestablishment ofindustli, but her turbulentadministration was alsomear that overallmanufacturinq is alizationis a strongagricultural base.The mared by sevencoupsd'etatin the late 'losingsteam."ro Philippineagriculturalsectoris still uncom1980sand 1990,andby eighthourlong Fabellaalsopointsout with concem petitive-rice, corn,sugar,andthe meat powershortages knownas"brown-outs," that the Philippines's grov/this externally. industriesarestill the mostprotectedinbroughton by infrastructurelagsandover- driven;thecounfy stilldepends highlyon dustriesin the Philippines.

Meanwhile, demandof electdcityfor businessand foreignmoneyto flnanceinfrasffucture agdcultualinfrastructueallotmentsin the manufacturing.

Thesepoliticaland eco. projectsandfundgo*th in themalufac- nationalbudgetremainlow, gving way nomicshocksled to massive capitalpull- turing sector.He alsonotesthat the infor- to power,roadsandtelecommunications. outs by investorsuncertainof the eco- mal sectoris gowing at a fasterratethan Thisgoup alsoarguesthat foreign nomicandpoliticalenvironment. the formaleconomy. investmentis still too heavilycomposed Thisuncertaintycarriedoverinto Thetwo mostworrisomeblemishes of portfolio money,too reminiscentof the earlynineties,and the creditof the on the Philippines's economicperformance Mexico'sandThailand's recenteconomic country'snew-bornrecoverygoesto areits risingtladedeficir(US$ 6 billionin woesdueto the massive outflowof portRamos's fortitudein solvingfirst thepower October1996)anda highportfolioinvest. foliofunds.Theyarealsosayingthata lot outageswithin the first two yearsof his ment to FDI ratio (approximately 4:l)rr. of fundsare goingto treasurybills, the pfesidency, thenworkingon investment, Whilethe Philippines hasposteda budget constfuctionof opulentshoppingmalls, deregulation, and liberalizadon policies surplusin the lastthree yea$, the cur- andthe "fixingup" of govemment corpothatwouldbringin capitalfor infrastruc. rent accountdencit,mostsay,hasbeen rationslinedup for privatization. ture.Much.needed FDIcamein forcapi- nnancedby privatization money,i.e.,the A recentdebatein the FarEastem tal projectsasa result. sellingof government propertyaspalt of EconomicReviewpointsthat tradltional RaulFabella, economist andprofes- the "economicturnaround"agenda.

And stockholdings in the Philippines, due to sor at the universityof the Philippines,is while the coun[y cancounton massive the boom,have become"overvalued". lessoptimisticaboutthe economythan inflowsof money-at oneestimate, US$ Thereis interestin bankingsectorstock, Villegas or De Ocampo.\{hile he.admits 4 billionin 1995r2-fromoverseas work- but thereis concernaboutthe containthere is growth fueled by foreign direct ers fmosdyin domesticand entertainer ment0f liquidityandtheimplementation March-April/Mal'-June l9g7 | The AsianManaset

3l

of tax reform,andoptimismin the $owth eventhough of "secondline"companies companies areawareof the politicalrisk stepdownin 1998.13 impliedby Ramos's

Guidelines...

Howto Sustain theBoom?

Some investinvestment, lessportfolio Moreforeign direct Sourcing of lnvestments: long-term source worker remittances arenota reliable menG3-venseas foreign offunds.

Conclusion:Policydirections While on the whole thereis great present, realestate, and toomuch weight restsonfinance, Sectoral Growth:At power generation intheeleckonics andgarments Meanwhile, exports seclors. economic fu' optimismforthePhilippines down. industries areslowing to view the ture,therearegoodreasons boomwith caution.Afcurrenteconomic willsend TaxReform Prcgram implementingthe Comprehensive TaxReform:Not gapisstilla fundamental ter twentyyearsof boomsandbusts,this Nanowing thesavings-investment thewmngsignal. problem. macroeconomic upswingseemsalmosttoogoodto last.In orderto sustaintheboom,thesearea few isrising, divided equitably.

Percapita income butnotbeing lncomes andFunds: of the issuesthatneedto be addressed: for-funds, technol-ogy, andbusiness enterprisbs arestarving Srn'att andrnediurn l. How to ManageCapitalInflows: opportunities.

Themdn concernis how to avoidanecoissuesmayrePolitical Stabilitv: Witheleclions lesshan a yearaway,political nomiccrisislikethatofMexico.Thecomtard economic issues. positionof foreigninflowsis still skewed remittances andportin favorof overseas thePhilippines folioinvesmenB,whereas A oncetheyarefullyin place-financial anddisastrous. long-term funds lar-maybeshortlived, is relyingon medium-and andinftastructure global marketderegulation affecting espeexport slowdown, oflong andotherprojects forinfrastucture but taxes arethemostclumodernization; cially the semiconductor industry, is enreductionofOCW duration.

An inevitable position. cial. dangering thecountry's export remittances is anotherquestion.

Toconclude, therearemanyother 4. Economic Reform: Someelforts Political stability isthe 2. Continuitv: to "suseconomic components thanoth- necessary in assessingatreformhavernoresuccessful mainconcernof inveslors oftheComprehensive Tax tainthe boom,"that is, a growthrate countrydsk. Ramos'reformshavebeen ers.ln thecase geaterthan6%overtheyears whichmust was less suc Reform Program, the effort have laudedfarandwide,suchthat people reform as a system involving be viewed looking at the even. cessful. lnvestors are Ramos retainingthepresidency suggestâ&#x201A;Źd and vigilance in both the economic will and tual outcome of this law.

They also pastthemandatorysix years.(Representagetting political the eco' prornised sectors.

Extemally, DeOcampo communityhad lookatthereforms tivesftom the business previousiygoneso far as to wish for a "Ramos in 1998.) clone"'4 isunconstitutional, Sincere-election Jan'Feb 1997 Projects byCountry, MajorForeign lnvestors in BOI-Approved* Value of Equitylnvestments ProducuActivity Country thereis a moveto amendtheconstitution (in'000pesos) andallowhim to retainthepost.Theques4,360,000 Virginlslands Nickel mining etal. persists.

Fea$ however, tionofsuccession, 2,340,000 Netherlands Power cogeneration healthbrieflyrigaboutrhe presidenr's 1,819,000 toil Malaysia Manila-Cavite geredsubstantial Fresh/ 310,926 capitaloutflowsin late Packaging material, Japan chilled onions, Bath shower year. last December andlavalories,seat . mixers Regionally, if the peaceand order andpillars, assemblies, doo[s situationcannotbe stabilizedin the switch units membrane 116,716 Mindanaoareaevenafterthe consolidaDenmark Refined carageenan plant power 89,076 Diesel Great Britain tion of forcesof MuslimMindanaoGov46,620 Raw sugar Hong Kong governernorNur MisuariandtheRamos Portcargo handling activities 44,498 Auslralia a threat to investors ment,it will become paperrecycling 23,693 Waste Singapore 20,000 andluggage wishing to enter or relocateto the Taiwan Bags ' 14,512 Aggregates Resident Chinese Mindanaoarea.

9,185,041 VALUE TOTAL 3. SuucturalBusts:This is clearly 26.34 US$1.00=Php unemployment to watchout for.Persistent (BOl).

Source: Board ofInvestnents asa mismatchof laborneedsmaybecome ' pâ&#x201A;Źsos. inthe Countries' tohlinvestrnents ofnotlessthan10million Withequityinvestments a question.Partof the solutionmaybe a pesos. poectalone reaches 10 million amount, but no one Philippines may exceed this policies revisionofeducational natjonwide projects projecbreferlo investors wilhit andcan areregistered whose Board ol lnvestment Also.re. regarding science andlechnology. projects andproject include ongoing incenli'/es torforeigners.

Thefigures availofinvestment madeasol lheDeriods mentioned above. lianceon the fwo majorwinningpxports commitmenh in particuof tre moment-electronics 32

TheAsianManaget I Ma(h-April/May-June

1997

Major Projects.

Approved, BySector, Jan-0ec i996 Sector No.of Projects TotalValueof Projects ('000pesos) Infrastructure/lnduskial Service 10 269,378,698 Public Utilities 13 35,593,406 Domestic Producers 32 32,367,000 Energy-Related ProJects 7 13,816,096 Tourism-oriented Projects 36 12,744,290 Export Producers 39 12,025,826 Motor Vehicle Development Program6 864,975 US$1.00=Php 26.21 Sourcer bul

MajorProductsApproved,

By Sector,Jan.Feb1997 Sector No.of Projects TolalValue of Projects

Energy-Related Projects Domestic Producers Infrastructure/lndustrial Service Tourism-Oriented Pojects ExportTraders Export Producers Public Utilities US$1.00=Php 26.3"4

2 10 3 4 I 6 3

('000pesos) 11,036,220 8j92,125 8,068,646 3,448,260 1,541 ,000 1,281,831

nomictundamentalsght, providinginfrastructure and palatableincentivesare necessaw Internal caJdonary measures in the longrun shouldconslderdistributing growthpastthe few keywinningsectors, a d d r e s st h e s a v i n g s - i n v e s t m g ea np t, puttingthe heaviest weighton a full im. plemenrarion of taxreform.PuLrogerher, gve thePhil theseandothercomponents ippinesa betterchanceof maintaining levels. $owth at sustainable Endnotes: Ti$ao,fugobeno.Eackin Srrengrh.'

Far EasternEconomicReview,25 July 1 9 9 6p, . 5 6 . ' "Equity:On SolidGround."Institutional Investor.

March1995,p. 12. ' Abueg,IoseMarle.'The Bandwagon is o0O. Rolling."

AsianBusiness. p.

I January

oo( o6a

"De I Morton,Katherine.

Ocampo's healingtouch."Euromoney, Source: September BOI 1995, pp. 155156.;Tan,Abby."Economy has ' Forindividual projects whosegrandtotatis notlessthanp60miltion. turnedthe corner."AsianBusiness, Dec e m b e1r 9 9 5p, . 1 2 .

5 Villegas, Bernardo M. "Gearingfor Globalization."CRCStaffMemos,No. 3 5 ,1 9 9 5p, . l . o rbid. ? Ibid.

MajorForeign Investorsin Bo|-Approved Projects (rankby region), Jan.Dec 1996 'i Ibid. o Abueg, "The Band.

Country Value ofequity investunenbCountry Value ofequity investments JoseMarte. (in '000pesos) wagonis Rollirg."AsianBusiness, .

Asia 11,719,089 CaribbeanRegion 635,348 J a n .1 9 9 6p, . 4 1 .

Hong Kong 7,313,666 Virgin lslands 467,856 L r A g o n c i l l oD, a n i e l ." B o o mo r Indonesia 1,469,962 Bermuda 167,492 'l,430,107 Japan Bust?"TheSundavChronicle,OcSingapore 744,970 Australia andOceania 131,075 t o b e2r 7 , 1 9 9 6p, p . 1 1 , 1 8 .

Thailand 166,570 Australia L ' l b i dp, . 1 8 .

56,805 Malaysia 164,950 Nauru 74,270 "Confibutions D Tiglao,Rigoberto.

(South) Korea 260,111 Taiwan Welcome."

132,897 far Eastern Economic lrliddle East 21,701 Resident Chinese 35,856 lran 21,701 Review.

May23, 1996,p. 59. rr "lryhereto PutYourMoney:Fash Europe 4,363,078 UnknownCountries380,670 ionablePhilippines."

FarEastern Great Britain 3,7U,021 Belgium Economic ReviewOct. 17, 1996, 280,000 VariousCountriesl6.909.549 Netherlands 116,97'1 US$1.00=Pho 26.21 p.78. goard Finland 99,150 (BOl) I R o s a r i easn d R e v o l v e 1 5 Source: ofInvestrnents in AO 505 Italy "Back 'With on the Road: A survey of the Germany 57,037 equityinvestments of notlessthan10million France Philippines." pesos.

TheEconomist, 24,624 May Countries' totalinvestments inthePhiliopines LUXem00urg 1'1,680 mayexceed thisamount, butnooneproject alone I I, 1996. reaches pesos.

10million I Jointventurcsfall NorthAmerica 825,501 underthiscategory Project'activi- Prf.sso/ f/ar.is.o 1.. Ronnn, lr., is !h.

E\tculit,t USA L)ir.t lot of tht AIM 825,501 tiesandproducts inthiscategory include tollroaddePolicV Fotum. l lcntct ALldress: velopment (theMetroManilaSkyway), goldbultion, porlland andpozzoland cement, andanintegrated < lr d,tk utta iln.ed u.ph>. poultry project.

Mariontrc C. Caraniang is a R*earch Assot:itxtoi thr I,0liry Forlun.

Ma.ch-April/May-Junelg97 | TheAsianManRer

33

i^'?tffrrI caseroom Ramos wasthefirstuserofACCEED'S President withstudents andfaculty hehada "case discussion" where facilities. videoconferencing using

t0

doorstep. anivesatACCEED'S ThePresident "Oh,likewhatl'mdoing yourquestion, communicating now:I'manswering question hereplied: stress, ofhowhemanages Tostudents' professors.' your of in the company inthiscaseroom posing andrelaxing policy, forphoto-opportunities, thisbuilding, inaugurating AIMprofessors. dialogue.with Healsohada close-door 34

The AsianManager I MaNh-April/May-June 1997

SocialInvestments for Global Competitiveness TheAIM CenterforContinuingExecuttve Ed.ucation is a homepartneringfor globatnnnagement excellencehasbuilt-a partneringfor investingin humannnnagerialcapital.

KeynoteSpeechaf PhilippinePrcsidentFidet V Ramos,Inaugufttion oJ ACCEED lAIM Centetlor ContinuingExecutiveEducation), March21, lqq7.

pinesnumberl2worldwidefor one of ing socialinvestments of whichACCEED -Lne is a sterlingexamplein socialinvestments eightkeyfacrors of compedtiveness factorof "government."

Thisfactormeas- by the international business communiry urestheextentto whichgovernment poliI realizethat "socialinvestment"is ciesareconducive to competitiveness, by a new termfor an old idea.But it is AIM henI wasinvitedto inaugurate providing macro,economic andsocialcon- that is transforming it from a vagueidea the AsianInstituteof Manage ditionsthatencourage andminimizensKs t0 the voguethingfor investors.

I underment {AIM) Centeffor Con. foreconomic enterprise.

Thisrankingputs standtharAIM hosrsdonarions sjgning rinuingExecuLive Education TACCEEDl usin theleague of Canada (ranked l0,h), three times a week for ACCEED or orner building-l acceded immediately.

Forto- Switzerland (11'h),andAustralia(13,h). relatedAIM programs. day,we not only inauguratea building; The buildingof ACCEED-bothtiterally I myselfampushingthisasthe ,,inwe celebrate relationship.building. and metaphorically-is an outstanding thing"byproposingto my peerstom omer ACCEEDis a concrete manifesra-exampleof private sector,driven innova24 Asian and European nadonsin thefirst tion-all 12 storeysof its 112 electronition that arisesftom this competitive cli Asia-Europe (ASEM) Meeting in Bangkok c a l l y l i n k e d e x e c u t i v er o o m s a n d matewe aresustaining. lastyear-so that AIM becomes thehome caserooms andconference rooms-of the proposed for the Asia,Europe Management tirelessand timelessbridgingof relation.

ACCEEDas Driver Centre. shipsby AIM berween busjness anoaca for SocialInvestments ThisFebruaryin Singapore, on my deme,the Philippines andAsia,Asiaand YouknowaswellasI dohowprom- l n s l r u c t i o n F s . o r e i g n A [ f a i r s S e cretary t h e r e s lo f r h e w o r l d .A C C E F Di s a ising the Philippine economy is.

You know Domingo Siazon formally promade this house-a home -tharparmering lor glo- of the primary indicatorsthat meanwe posal ro his coileagues in rhe Flrsr i-oreign balmanagement excellence hasbuih. are on the right track-our CNp,CDp, Ministers'Meetingof ASEM. Andit is apartneringthat evencom, foreigninvestments, exports,pesovalue, Thus,theideahasbecome a flesh petitorscan only accedeto: a partnering international reserves, inflation,andinter a n db l o o dp r o p o s aSl .h o w i n ug n m i s r a k jnvesting for in humanmanagerial capj nationalconfidence.

I commendAIM for abiesignso[ interesl on _rsparr.rheEuro tal. panin susrajning takjng ourgowrhbytak peanCommission promptedto sugwas AIM hascapturedthe imagination ing the initiativein mobilizingandrally. gestthattheterm"centre"bechanged to of investorsworldwideand madethem "programme," so that it will be morern placetheirbetson education-thesocial keepingwith the spiritof ASEM. inftastructure of thecenturyahead.What I alsopledged,in a symbolicact to greaterlegacycanwe bequeath thanedulsay: "Let AIM be the best demonstateourseriousness with theprocation-the nexusofcollaboration among school of choice posal,to offerthemodestamountof PhP3 of anyone competjtors, leaders, shakers of industry? primedto lead in Asia." millionfromtheOfficeof the Presidenr ro I recallthattheWorldCompetitive. the AIM for its start-upoperations for nessYearbook of 1996rankedrhe Philip ASEM. Ma.ch'April,/May-June 1997

The AsianManapet

35

Working on Visibitty Yet I seethat fot ACCEED KarlPoPPer The Philosopher of alone,you alreadyhavePledges "People a are not AIM is right in develoPing once said that up to PhP300million.Thiscouldbe are clouds."Because giving sharing they and clocks, of tradition just a dropin the bucket,however, peopledonotfit neatlyintoslotsand and is to be commendedfor not whatYouhayeto do! considedng shouldbe run holes;organizations relying on generosityalone but An electroniclibrarythatis the ratlrer systems weather as more firstof its kind in Asiato keepahead by sticking to a PolicY of machines. needsconstantupdating,stategtc deliveringthe goods' Havingbeenbriefedabout and validating research,accessing, own historyand ACCEED'S AIM's information.Executivefacilitiesfor invest' social into adventue evolving andprogams year'longconferences a]of indusuyfromtheUnitedKing' ments,I canonly affirmthatAIM has to stayat shakers equipment needstate'olthe'alt its and its approached ways People Japan,Singapore' leam' dom,theUnitedStates, the cuttingedgeof an ultramodern ascloudsratherthanclocks, Boardof stakeholders Austalia-your Mala)sia, India, continuously of all, Most ingenvircnment. firmly on the $ound and yet feet with participate l attractingandkeepingyour international Govemors- were hereto clockworkefficiency. with operating the faculty-all thesedemandlong'termcom' see the strategyhas worked fine; for Youto snaremY invitaion My It mountainis comingto AIM. ln education. mitmentsto investments to haveYouin summons not a is dream how AIM cansustainall these is amazing Keenlyaware to time. oblivious clouds the now solelyfiom jncomefromoperadons AIM as Cateway you at hand,and have resources of the and socialinvestors.I know you barely for Global Competltiveness I am di' you need, will that resources For thereis mole to iust beinga the makeit. Thefactis Youdo.

Edu' Higher on Commission the your recting I sharc fund'raising driverfor socialinvesfnents.

Yoursocialinvestment possibility into the look (CHEDJ to for the cation effortshavea practicalandnot iust a sl'In- vision for ACCEEDas the hub with AIM a progam for of co-financing community.

Management Asian international bolic value for AIM-the "AIM On the Air," usingthe HigherEduWith tlat, let us dare to dream. statureit hasacquircd,and the partner' Fund,andto launch thatAIM cancanopenwiderthe cationDevelopment Drearn not You do shipsit is nurtudngworldwide' tlxe gateway Year forgobalcompetitive- thiswitiin you delight Philippine only satisfyyour customers; ofthebroadcastmedium use Let the building important is an ACCEED ness. comlng them. That is why they keep visibleto our country' more makeAIM back-if not with the money,then with block. those especially Yet,I believelt is the intellectual menandcountrlnvomen, new partnetsfor You. the in residents foreign to within this in rural areas, a tradi- capitalthat is concentrated Youareright in developing networK cable and, through sub- Philippines tion of givingand sharing.AIM is to be building'swalls that will form the in Asiaandtherestof theworld,trumpet leaderpush managerial for of our generoslty stance fot not relying0n commended AIM to the globe-its executivemanage' alonebutby stickingto a policyof deliver' shipin theworld. in the itsstategicresearch AIM aimsto be the first schoolol mentprograms, ing the goods.ACCEED-thebuildingits of this' I choiceof anyoneintendingto'wotk in Asian Centerfor Entrepreneumhip' is a testamentto this. Because its Asian Finance, and of Centerfor Banking cannothelpfeelinga senseof pridethat Asia.I say:LetAIM bethe besfschool PolicyForum.

Asia primed in to lead anyone of choice in the Phiiippines. thlsis happening over' aheady AIM has that I am told asthecenterfor continu' ACCEED, Concluding Remarks usheringinanera takenHarvad in a recentsurveyof emeducation ingexecutive Let ACCEED,the building,be the community'ls ployersin p$iaasthe numberoneschool stafi of AIM'Sphysicalvisibilityherein the of the AsianManagement pool. anotherreasonto holdourheadshigh.As fromwheretheygettheir $anagedal heart of Manila'sfinanciaidistfict. Let underalso survey Euslness ,4sr?n thevehicleof AIM'Siudicious,systematic The the AIM Centerfor Continuareem' ACCEED, that66%of AIM graduates througbits scores socialinvestnentmanagement becomevisible ing ExecutlveEducation, Foundation(SRF), ployedoutsideof the Philippines.

ScientificResearch For andatuactivein themindsof leaders.

I alsoknow from mY interactions foundedin November1968,this is still leaders. more begets effectiveleadership with your alumniin Indiaandelsewhere anotherfeatherin our caP. t0we buildtogether suuctures The youl I canonlyhopethatAIM'sexperience and,of course,the alumnihere,that rela' day are a testamentto our lifelong frombothyourdegeeandnonin socialinvestrnentplanningandmanage- graduates Theyareour meansto tionship-building. thatotheNcanleam degreeexecutiveprogramssteerthe pole-vaultinto the 21stcenturyand be' mentcanbesomething from, especiallyin these times of wheelsof govemmentandindustrywhere yond! theyare. social to ACCEED's $antsmamhip,socialcapital'buildingand Congratulations KnowingthatAIM hasbeen,hom intemationalsocialdevelopmentcooperadream' to AIM'S privatesec- investors!Congatulations tlon.ACCEED,though AIM, canbe the the start,supportedfully bythe for the and shakers!Congatulations ers in this country tor inspiresme to placemy betson AIM promiseof competitive driverof socialinvestrnents in leadership mangatewayto globalcomastheeducational andthe restof Asia. agement! fot Asia. \ryhenACCEEDhaditsbleslingcer- pedtiveness Maramingsalamatat MabuhaY! the emonieslast FebruaryI understand 36

1997 TheAsknManagerI March'Aprtl,/May-June

TheASEANManager of the Future Changes in the natureof workand.the needs

of ASEAN'sfuture require drastic change in the managerbcapabllities

dwin Markhamwasseething with sentence rangout harshandimplacable; we mustdiscuss someideasofwhatAsean indignationoverthe piightof the can Decome, must become, in thenext25 "cursed workingmantheworldoverwhen [is]the groundfor years. hewrotethepoemthatmadehimfamous, t h y s a k e ;i n s o r r o w s h a l t Aseancountrieshaveexperienced "The Man with The Hoe."you canfeel thou eat [of] it all the days in thelasthalfcenturytheequivalent of a hispassion ashe ragesoverthe suffering o f t h y l i f e :T h o r n s a l s o a n o wiid rollercoaster ride.

When World War ,,slave of the working man, the of the t h i s t l e ss h a l li t b r i n gf o r t ht o I II began,we wereall (theThaisexcepted) wheelof labor": thee; by the sweat of thy c o l o n i eo s f t h e w e s r e r np o w e r s - t h e brow shalt thou eat bread.,, Americans, theBritish,andtheDutch.The Bowed by the weight swiftsurrender of theJapanese caused by of centuries he leans Up until the industrial-revolution, the shockof the atombombgaveus the Upon his hoeand gazes strenuousphysicallaborwas seemingly opportunity to freeourseives hom our coon the ground, man'spredestined lot.Gradually, however, lonialmasters.

The emptinessof ages duringthe last two hundredyears,ue Wehavespentthe timesincethen in hisface, invenlonof labor.saving. productiviry.en.tryingr0 bLildprosperous modernsocie And on his back hancing machines, thedevelopment ofthe tiesresponsive to theneedsanddesires of t h e b u r d e no f t h e w o r l d . information andcommunications technol our peopie.By and large,we havesucogy,andthefloweringof.modern manage, ceededin expanding our economies.

For Thispoemwascomposed only a menthavefundamentally transformed the the last20 years,Aseanhasbeenamong hundredyearsago.Eventhen, mostof natuleof work. the world'sfastestgrowingregions.Our man'swork wasstill hardandroughand It is a measure of how far we have people enioya risingsundard of liyingthat brudsh.

ALLheendof rie l2.hourday,he progessedsinceMarkham'stime thar as Lheatens to eventually overtake thatof our wasexhausted, drainedof all strength,and we, today,try to peerinto the future,we formercolonialmasters. asMarkhamsodramatically put it, nolongerlookuponworkasthecursethat Wearealsoon our wayto developour forefathers did. Instead,we canfore- ingdemocracies builtnot on theindividu, "dead to raptureand despair, seegettingwork donein thefuturemuch alisricspirirof rhe westbur on a family. stolid and stunned. moreeasily,much lesslaboriously, with centered communitaianism thatseems to a brother to the ox." computeractivatedand controlledma- morefaithfullyreflecttheAsianpsyche. chjnesrelievingus of muchof the physiWe sdllhavea longwayro go be.

Throughoutmostof the agespasi, calandmentaldrudgerythatused to char- loreAseancanestablish itselfasa stable manhasregarded wolk asa scoulge,an acterizework. memberof theworld'slew developed, ininescapable partof the bitterhumancon. dustdalizedregions.The next 25 years dition,a consequence of man'sfallenna- Asean's Future maywell determinewhetheror not we ture,a punishment for originalsin.In the WhatwilltheAsean manager of the will makethe $ade. gardenof Eden,theBibletellsus,Adam's futurebe like?To answer thisquesLjon, Most of the economicgrowth of March.April/May-June 1997 ) TheAsianManaper

37

As leaderand motivatol a good that Copingwith the basicchanges Aseanhasbeenbuilt on low laborcost. managerstill mustdefinethe corAsean in the textiles the natureof work hasundergone Westartedoffwith manufactudng porate mission,determineorganizational the imperatives andothersimilarlaborin' pastcenturyandfulfilling andgarments that will supportit, and createa values these have emerged that of Asean$owth tensiveproducts. whereit can within theenterprise the culture then are past few decades-these, Whenthe PlazaAccordin themid' He musr convince fruition. dnd lind rhrive must meet managers thatAsean to challenges eightiesdevaluedthe dollarin relation there that his organization of the members c o m i n g t h e s u r m o u n t d u r i n g a n d particularly Malaysia and yen, Asean, the their individual between congruence is a will need to they To do so, millenium. e l e c t r o n i c a s s e m b l i n g b e g a n Thailand. of the enterprise; setof goalsandtheobiectives a special productswhich,in orderto remalncom- developwithin themselves andto their to their minds he mustappeal andattitudes. skills,knowledge, petitive,hadto migratefromJapan. jnterest. themto must also inspire He self Therenewedentryof Chinaandlnexercising work enthusiastcally. do their oflow-costlaborers, The AseanManager'sRoles dia,with theirmasses saLisfying To be an effectiveAseanmanager, rheirinitiativeand creativily. into the world'smarkets,will compelus andto talents develop their need to their What values must know? what must he to build up the skillsof our workersand impor and more larger something achieve productiviry iI he spouse?

Lheir to significandy'aise in self-interest; own mere than their not tant have ofmanagement The basics we areto temaincompetitive. muststill effect,he mustflretheirwill with a vision A goodAseanmanager ln effectwe will haveto emulate changed. "largerthanlife." a resource andaninnovator; the four dragons-SouthKorea,Taiwan, beastrategist Hong Kong,and Singapore-whohave optimizerandproblemsolver;a leaderand The AseanManager'sToolkit andassem- motivatorof men. movedon frommanufacturing lfthesethreebasicrolesoftheAsean productsto blingAme canandJapanese managers staythe same,what thenmust designing,engineering,producing,and toolkit? the Aseanmanager's in change undertheir ownproducts, marketingtheh work and the of in the nature Changes Korea's Examples oftheseare own brands. and l e a d e r A s a wlll require future Asean's needs of Taiwan's cars and Hyundaiand Daewoo good a innovator, capabilities in the change similarly drastic compulers.

ACer Asean managel of theAseanmanagerSurelyhewill have what higher We mustdetermine o f w i l l fires the lo deveiopspecificskills,a particular industrieswe canbestc0mvalue'added base,a definiteset of values kJ.rowledge members of his petein andfocusour effortsandour reif he is to succeedin his attitudes and has up.Malaysia with a on buildingthem sources orqanization "larger task. transformative takenitsfirsttentativestepsin this already than vis-ion Asean managermustnot only The to do directionby buildingup its capacity life." problem-solving and sharp analytical have producing on iLsown and oil explorarjon He skilis opportunity-seeking creative designing and Protoncars;lndonesiaby skills intellectual use these able to must be Thailand aircrafts; its own Iight building than muchmoreflexlblyandinnovatively feedsandpoultryproduc' by establishing will future he past in the because andinnovalor,a good in the As strategist t i o n l a c i l i t i eisn d i l f e r e nct o u n t r i eisn accelerating with ever to cope stiLlmustscanhis envi have

by Aseanmanager Asia;and the Philippines Southeast devel' that change.The paceof technologcal exportingto our neighboringcountries ronmentand spotthe opportunities uo in progressively speeded has opmenr what of; determine like SGVand Certeza hecantakeadvantage servicecompanies 'hiscenrury before experi rale never at a op exploit these are needed to resources andJollibeefastfoodoutlets.

But we mustdo morethan tiese. portunities;marshalthe lequiredre' encedby man. house I recallthatmy $andfather's forhisorganizadon: objecdves alsofindthefundsand sources;set Wemustsomehow never even he a telephone; pro' not have plans, did policies, what and determine in univerinvestments maket}Iemassive to sawd jet plane-thevhadnot beenin' training grams,and projectsare necessary andtechnical salbasiceducadon how,on theplane ventedyet.I remember that achievetheseobjectives. aswell as in physicalinfrastructure graduate I hadsuch school, way to on my optimizerandProblem Asresource to suppoftandbackstop will benecessary use a slide' how to learning a hard time must good still Aseanmanager solver,a our economicambitions. still a few were calculators Handheld rule. money, manpower, We will alsohaveto Proveto our- deployand organize needed I went to years The school away. the organization's mate als, and selvesaswell asto t}Ierestof the world machines, room to air-conditioned where social,economic,and politicalrelation a wholâ&#x201A;Ź.large democraciesr that our Asean-style my students Today, its computer. house the marketing, and manage set up ships; are subordinate the rightsof individuals ever canying campus the walk around personnel, infor and finance, opefations, have stayng at large, to thoseof society and my powerful lapLop computers andtrack more oftheenterprise; powerandwill ultimatelyredoundt0 the mationsystems sake, nonchalanlly grandson. heaven s for andcon$eatergoodof the geatestnumberWe theresultsdealingwithshort-falls the useof visitsthe Louwemuseumwhile surfing over flictsastheyarise,husbanding mustbeableto tum ourgovemments with thefrugalityof a the net. Tomorrow'smanager-never asLeeKuan thefirm'sresources ofleadefs, thenextgeneration prudent andmakingsurethat doubtit-will needali the mentalflex' housewife, Yewdid to GohChokTongin Singapore, i n c o o r d i n a t e da n d ibilityhe canget. a r e u s e d mannersotllat t h e y in anorderlyandpeaceful ln additionto thesecerebralskills, the objectives to attain ways, slnergistic in their own them tley canfurtherdevelop will haveto cultivate manager the Asean the enterprise. of futurâ&#x201A;Ź, our regjon's steadandensure 38

The AsianManager March'April/May-June 1997

somepowerfulbehavjoral skills.Asourin theswiftdevelopment of evernole pow, T h i s m o n s t r o u st h i n g dustries moveupscale, aswe beginto em erfuicomputers andtelecommunications distortedand soul-quencht? pr0ymorec0mplex machinery andmore systems, the managermust not only be Howwill you everstraighten up s0phisticated technology, themanager wiil ableto usethesetoolsbut alsohavea full " t h i s s h a p e ? naveto cultivatewell-honed interpersonal understanding ofhowtheiradvanced rccn, skilisthatwill enablehim to listenpercep nologlescan fundamentally affect,alter, Today, a hundredyearslatel we can tively,explainlucidly,persuade convmc_ andtransform thebusiness he is in. teply:" Byhamessing thepowerofwotk_ ingly,motivatestrongly. ln short,he musr Finally,in the globalized world of easingmachines,af informationand tel become good a teacher.

He mustalsobe the future,the Aseanmanagerwiil need econmunlca ons rcchnologies, and af ableto negotiate successfully, resoivecon- to embrace attitudesandvaluesthatran- modemmanagement, we arc naw able flictsamicably, and buildwell.knirand scendnationality andrace,cultureand to liberatethe worker.tom the tyrannyo.f smoothly workingteams, notsomuchof creed.Hemustnurturea senseof respon- gri nding, degradinglabot.,' unskiliedlaborers ashe doesroday,but of sibilitynot onlyto the stakeholders in nts highlyskilledknowledgeworkers,of sci e'tterptise -hi) (ustomer(,hjs wofkers, In our owr words,we can, entistsand technologists whom he will hiscapitalists, andhissuppliers-butalso haveto manageand motivateand who t0 the society,to the country T o u c hh i m a g ai n and to me mayhaveacademic qualificatjons even Aseanregionwhich he servesano ln with immortality; moreloftythanhis. which he livesandthrives.

Givebackthe upwardlooking The Aseanmanager will needa a n d t h e t i gh t ; knowledge.base of many,,languages" if he Liberatingthe Worker R e b u i l di n h i m is lo fulfill his functionwell: that of ecoln his highlyemotionalpoemwe the musicandthe dream. nomicsandaccounting, the physicalsci- quotedearlier,EdwinMarkhamasksthe encesandtechnology, psychology andso. rhetoricalquestions: ProfessotCabi,n GnbV' MetldL)zn, AIM,S K.T. Li ciology-, mathematics Pfttessor in littunntiunl Managoncnt, uas Dean andthe computer "O He mustbe ableto communicate fan 1958 1985, ind presitttnt front 1978 1986. m a s t e i s ,l o r d s , Hc is cutrtlrtlv Idlnit: of the Internatio,Itl Acacl theirvocabulary theirprinciples, andtheir a n d r u l e r si n a l l l a n d s , eny of Mnnagenrntt. lnt.rntt Atldrz\!;: oaslcconcepts t0 everyone in the organi l s t hi s t h e h a n d i w o r k <gabv@non.&lu.ph>. zationin waysthattheycanacton. With y o u g i v et o G o d ,

Th. vjsbn of a berlef countty ca]]s for n.dhgful actjon the lakmgofconcrelc sreps.W. jnThePHINMA Croup rnak€ our conrriburion tn spe.i|c areas where wc Deuev.lt ma(c.s most. In basic industrica.

In ccment manufacrurc, for elamplc, w.aim our su(c.srve expans'on protects at long.term srabtlry tn tn. supptyor our(oLnrry s pnn.'p.t burldrnAmatendl Ourcon!nLal upgradng ro sur..of rhe.an r.chnologies anrl pMessrs mnifesrs ou! corunjLn€nr ro ofier o;ty th€ hjghesl qualry of producrs. Thjs is achjeved through tuU s.ale prograns invotvhg big lnvestrnenls tn modtn ceme.t plants, as w€llas in lhc professlonat p.opl. tha!

Ourwrdenrngdrslnbuuon ncrworks. hk.uas.. arr helping fill rhe increasing demand for c.menr throughout rhc archipelago Forbuilding more roads, flyNers and bfidges. For belrer arrand $a porrs Fo' mor. modern hrgh-r,s.s For a conc.ere pa fi ro a befter country - wc work hard 10better the basr.s

rhe PI{INMA croup Betterbasicsfor a better country.

SLTLDrNC!tnT!tJa^15 uJ.nobd consohdr.d Jnduslnes.tn! r r\UasCcn'rCo|l.'auon. aacnoranccft nrcorpora0on rc.nlEl ccm.nr coryorarotr , Da!3o Un)on c.nrir co,DolaooiL. rr' c.menr coqff{on . R'7n cfm-rcmw"r r,r,sorac.n-, coaoraror. lra.norsr s(tt co.r,onron ! t't liMr\.l MI conc,!( corp.rdhr. ca xMr^l+r.ai.s copdrbi. htand ouiry and Alltr.trr.s corporahof . unjon ,\!lr8rlcs corp.rafon ! ^rJs c . n r n r M . t r r !r n a c o r n . n r o n . a . D a * o r n n n M , r r k r r L n tct . r p " - r - " ,1.k.."

M,i*d-B c.rFrJrod . { I.r!r.ir aDnnnor ^. .. "b,,,r rdprS rDdu!n., B.i!coi,p,r\ !nrn.f

rrirD!

r. r|\rrRcy Tanr.Astr oLt e Encrl.v , ?\,.r co,tt co,ll,,rroD l.1r^r)t\c cor|or,'hoi . tn frodD(t,5 conDanf. J,r! '' \\1t ol r' o d 1' .f ..! ,1 ,., t., . or !r

March-Ap.illMay-June1997

TheAsianManaper 39

The Leadership Challengein a Knowledge-based

Industry workforce responstve A technologi.cally is likely to becomeand to Provide the keystrategiccompetitiveedge

in the21stcenturY a s t A s i a i s u n d e r g o i n ga n growth Process unprecedented that is changingthe way we do As uadebaniersarebeingtorn business. down and economiccooperationbelng have forgedwithin thefegion,businesses the challenge no choicebutto continously As liberaliza' wav thevconductbusiness. continue,mostbusi tionandglobalization bothsfategc and are nesses Undertaking operatlonalchangeinitiativesasaway out In addition, to becomemorecompetitive. thereis the ever evolvingenterpriseof Thegrowing change. rapidtechnological versatlliwof the computerchip and the in hadwareandsoftware rapidadvances ald in termsofsophistication development way we the changing arealso substance produce andthemannerin whichweconandprccess sume.Indeed,technological havetakenon differentdi improvements and brandnames,including mensions PIoc' Business TotalOualityManagement, Mapping,To' Process essRe'Engineering, andsoon. tal CycleTimeReducdon, Further,with the involvementof Internetas part and parcelof everyday andpnvatelife,we seeanexplo' business sionin informationexchangeand tans' of the actions.Indeed,the development Multi-MediaSuperCorridorin Malaysia is goingto re'shapeour thinKngon the 40

to raiseproductivityhas cteateda new in business. challengeto the leadership expect employees Thesetechnology-wise rheirviewsto be heardandtheiroptions of debated.Further,their expectations arealsohigherin the faceol theirleaders of higherremuneratjon risingexpectations perks.

Towards lhowledge-Based, Techno- andbetter The critical question ts, how do we logically ResponsiveWorKorce morethanany unleashthe potential of and motivate In thef,nancialsector, thatare employeesworkingin a knowledge'based developments othef,technological industryto suffrcientlyraiseproducttvity unending takingshapeasa resultof the questtowardsimprovedcompetitiveness in order to realisticallymeet their high inevitablyinvolvepeople,and how peo' expectationsin sharinS'in a more equt control.In this tablemannel the rcturns to ca7itaL plesklllsevolveto assume environment, highly infofmation'driven needs The Challenges Ahead: organization thepeopleaspectofthe Obvi' SomePefsonalThoughts to be re-visitedand re-examined.

In the comingageof a knowledgeously.the directionforwardis towardsa industry,leadersof organizations based and technolog' more knowledge-based prepareto facenew challenges. need to is likely workforce.This callyresponsive needto be it, thesechallenges I see As provide stlate' the key to becomeandto at differentlevels,i.e., per' gic competltive edgein the 21stcentury. aooroached levels. of, and the de- sonal,team,andorganizational Hence,the development ln, people investment mandfor increased will lead Challengesfor Persond Development andpeopleskills.Thiseventually will needto have I sensethatleaders in investments the industryto increases in order competencies core following skills.Theemergence the in peopleandpeople to succeed: of a youngergenelationof employees Stategic Orientatioft This relates highertechno' armedwith progressively long abilityto link (andtranslate) to the sueet' increasingly logicaleducationand day-to' to the concepts and visions range do can technology for what instincts wise

conceptand applicationof information in Malaysia. technology One thing is certain:all theseare andtheknowlboundto ddveknowledge an exponenat to expand edgeindustry rate. tial

I March'April/May-June1997 TheAslanManaget

dayoperations of the organization on the an outgo$th ol "management by objec- Challenges for Organizational gound. uves."

Development TeamLeaderchip and Communi_ In the 1000s,however, we experi.

At theorganizational level,oneofthe cation: At the highestlevel,thiscompe_ encedyet another shift. We now seea key challenges for leaders is to createa tencysuggests theneedto beableto com_ g^owinginterestin learning,values, and Learning Oryanization.

The concept ofthe municatea compelling visionthargener. theintegrityoftheindividual.Theempha_ Learning Organization is not new but re. atesexciiement, enthusjasm andcommir- sisshiftsro a softerdevelopmental leader- searchovetthe pastten yearsdo suggest mentto the organization,s vision. ship styleinvolvingcoachingand team. that,t0 suNivein the future,organizations Concem fo r Talent D ete lop ment: workwhichemphasizes thelong.termde_ nâ&#x201A;Źedto continuerenewingitselfto keep Thisinvolvesa genuineintentto nurture velopment andmanagement of humanre_ abreastwith extemalalldinternalchanses. thelearningprocess andfosterthe devel_ sourcesToday's CEOSdrawupona wide PererSenge. oneof rhethoughr.le;d. opmentof youngstaffin an envitonmenr range0t managemenr goingbeyond ersin thisfield,haveoffereda ratherpre. sryles, wherethey know they canalwayslearn coaching andaffiliauon.Indeed,rhisnew cisedefinitionof rhe LearningOrganiza. andgow. Here,CEOSwill needto learn abilityto applymultiple styleshasbecome tion. He suggests that the Core of the to position themselvesas corporate a criticalleadership skill in today'sfast LeamingOrganization involvethe need coachers or mentots. changing, technologically-driven financial for moresystemsthinking;the abilityto High Standads of prcfessio nal- services market. improveone'sown aswell asothers'menrbm.'Thisrelaresro rhe abiljtyto Daceser Hence,effective leadershjp todayhas talmodels;theabiiityto fosterdialozueto . and promotehigh standards of b;havior Decomeonewherethe CEOhasbuilt a taplabor's fulIpotenriai; thecommiiment asprofessionais in termsof stare-of-the.artwiderepertoire ofleadership behaviors to to nufturea senseof personalvisionfor skillsandcompetence.

It alsomeanstnar adaptand copewith the wide arrayof eachemployee; andfinally,the abilityto asa leader,thereis the everpresentand management situations astheyevolve. build a shared vision of the future.In espressngneedt0 continously updateand The moreobviousstylesthat canbe sence,the organization is viewedlike a to createan environmentfor continuinp motivatinginclUde: livingbeingrhatis fying to copewith the educadon.

The Visionaty LeadeBhip Styte externalandinternalchanges hkingplace Achielement Motlvation: This is ^. r nlsls aboutbeingableto delivera sense soveryrapidly.The effective leaderhasto aboutstrongconcernfor meedngor even of movingtowardsa briAhr futureahead. havethe right balanceof abilitiesto nur. surpassinga standard ofexcellence.

It also The visionaryleaderis onewho hasa ture this growthprocess with the appro, meansthat the leaderneedsto sethish. motjvatingvisionthat car provideexclte- priarebalance physiological of andm'ental challengjng buLachievable goalsrhror_igh mentt0 employees at all levels.It is about attitudesto bringaboutsustainable devel. designing motivalonalsystems in select, glvinga compelling visionfor everyone to 0pment. ing, developing,and retiring staffwho stnvetowafds. excel.

The Participative Team Leader- The Resulting Organizational Challengesfor Team Leadership ship SUle.Knowledge,based employees Culture Development are ke-enand willing to gjve their best.

Theseleadershlp challenges, to the Throughrhehisroryof socialscience, Ineretore, a styletharfacjlitates condnu. extentthey are met with sensibilityand t)ere hasbeent-remendous inreresrin the ousconsultations andinteractions will help commitmentshouldresultin the devef searchfor the "idealleadership.', Unfor- to unleashrheachievemenr needsof thi opmentof an organizational culturemat: tunately,.theonly consistentagreement employees. (i) Helpsharness the talent of knowledseamongthe expertsis that thereis really The People Del/etopment Style based employees, i.e. where .. a climatelf n0 onesingleleadership stylethatis ideal. Knowledge.based employees are always continuinglearningand developing pre.

Much dependson the situationand the eagerto moveahead.

So,whentheyknow vails;(ii) Vvhich,in turn,develops iteam setting,aswell asthe peoplewe haveto that rhey_are beinggivenrhe dghr help 0I managers andemployees who feelem, dealwith. rnro me tuture,their feelingof commit. poweredto achievetheirpersonal andorjn Thehisrorical shift ieadership styles mentwill be aroused. ganizational goals;(iii) This can leadin. reflec$dtis.WitI rheadvenrof indusuial evitably,to buildingan orgatizationwith capitalism in the 1880s,CEOSreliedpri manyleaders-indeed,a communityof manly0n coerciveandpacesertjng sryies leaders; and,livl Wirh rhiscommuniryof to successfully createmassproduction enleaders,the organizationcan further terprises.

Theseearlyenuepreneusbuilt evolyeto continueon a joumeyof fosrerempires on theirpelsonalvision anddrive. ing $owlh at all levels:individual,work The leadershipstyle was authoritative; teams,organizations, andsocietyat large. leadersmadethe criticaldecisionsand orderedothersto carrythem out. There Transformation to Leadership evdlutionary wereno "buts"and"ifs."

Theseareallwell andgood.Butwhat Bythe 1960sand1970s,thisstylehad process by which do all thesemeanin practiceaswe look changedasCEOSrealizedthatthe world t0 meet the chailenges of the 2lst cenaroundthemhad changed.partjcipatory managefs undergo rury?Pursimply,wharI am tlfjng ro dis. management approaches cameto be into become leaders. cernis theevolutionary process by which creasinglyin vogue.Butv/henthesedidn't managers undergoto becomeIeaders w0rk,a newaut)oritative sryleemerged: Thesetansformations, althoughnot

What I am trying to discern is the

March-April,/May-June 1997 | TheAsianManaper

4l

prod' lnvolves of moreandmoretechnology-driven ventionalwisdomon leadership close of building emphasis ucts and services:the Lhrough organizations changing cus' loyal Indeed, on flexibility and customizationas the relationsamongthem. advertise' walking waveof the future.What is oftenforgot- tomersarethemseives in loyaltyis no panacea is that ments.Granred of re'engineering tenin thisprocess knowledge' of the the challenges do not havea monopoly meering topmanagement but,nurturediudiciouslY, industry. of capilal based Thereplacement on freshideas. advantage. be an only it can mostvaluasabusiness's with knowledge "20-Somethings":Like it or not.to' to releaders top is forcing ableresource "20'somethings"' young workers'the day! jobs. wit]l trouble the lndeed, think their is thatit is farmoredifflcultto representour main resourcefor tomorknowledge indusry.Ihe phe' The needto ignite row'sknowledge'based tlan capital. manage "20'somethings" is not particujarly nonenonofthese theflamesof entrepreneuflsm L. BradbY on them book 1992 amongthe talented(hopefullythrough new The as to them referred C. Raines and andevenpassionl ford generating enthusiasm "Today'sNew Workforce."True, these "competence offersan opportunityat "2O-somethings" can be annoyingand building"-a clearchanceto out perform call,"a pain."Their Amedcans what the nimblerrivals. at the top,avoid LoyaltY: ln many technologicallY values-a desileto start "fun" on the job' have and hours, Iong are tediscoverleaders businesses, driven Indeed,having amongothers-simplyimpliesthat they ing tre virtuesof loyalry. thesamerulesastheirelders. takenloyaltyfor $antedin the don'tplayby"20-somerhings" carelessly oftenarrive the in theearly Worse, restructudng tiroesofmassive pitiful skills.But' with workplace the havestartedto real- at businesses nineties, only entrylevel representthe they is because ize justhow valuable,andhow hardit pool, busithe labor for ol supply source to restoreloyalty. productive on to depend will have nesses have tuths Twoimportantmanagedal of contributionsby theseworkers.That Oneis the importance sinceemerged. mustleamwhat makes meansbusinesses dependent knowledge' to staff talented SONS. how to motivatet]lem' and tlck them t0 wlnerability their Hence, businesses. in a Fifth,changeis theonlyconstant "20-somethings" dlf' Why are the Theother of keypersonnel. you mustre' thedeparture leader'slife. Consequently, people young are of us, cus' ferent? Like all to workingwithinan envi- is the needto holdon to established signyourself these and productoftheir experiences, the ronmentthat'sforeverevolving,adaptjng, tome$, giventhat the interchangeability workaholic childrenof often absentee, wiu Your skills serendipity. andadjustingto andrespon' parent independence learned be forgedwithin this dynamiccrucible' there' expect, They age. an early at sibility andthe moretestsyou survive,the more decisions participate workplace ln to fore, likely you are to becomea goodleader thataffectthem.TheyalsowantinformaAdve$ity,which is inherentin the proc' aboutwhat theywill do, tion, especially ess,is itselfa posiilveandmaturingexpe' how will benefitfrom them. And they mooting nence. and input fiom want feedback'attention Sixth,leadersare only assuccessful "20' words, other In managers. their Youmustearntne astheir subordinates. wantto beled,notmanaged' somethings" youby demonstrat' trustofthosebeneath newskillsfrommanagdemands and that of purpose,beingreliable' ing constancy ftom the effective lt, skills I see ers.

As integity'YouIorganization anddisplaying "20'somethings." of of motivator abilitY and the leader on mustsupportyour effortsby maintaining They must stepin where schoolshave whosetone.pace, armosphere a mentoring failedandtrainworkersin skillswith im' positively and valuesinstructmanagers onthejob-â&#x201A;Źven reading' mediatepayoffs andhelpthemto achievetheirfulI poten' "20-somethings" are math. writing and tial. genera' plevious ftom dlfferent indeed tions.Butdettingto knowandunderstand Phenonena KeY Three Copingwith inthem,andgivingthemthe artendon. phenomona: in meetingtomortue success Finally, devel' need they feedback and formation restson the challenges row's leadership committedto opsproductiveemployees cope'in ad' to effectively abilityof leaders buildinga strongfuture. dition,with threerathercommonplace Who are theY?In theflnanceindus' which.in my processes or phenomena "20-somethings" aremorelikelyto be try, view,areofteneitherignoredor givenlow graduates althoughscho0l university loyalfyand priority,viz. entrepreneufism, but asa ignored: not be should leavers "20-somethings."

Letme elaborate: . basic lack the usually general they rule, con' Ent epreneuristtt Post'Sloanist easy,is simplerthanyou maythink.As a youcandrawfromaninventory manager, vision,and observations, of expeflences, to which,if used overcome otherqualities inefiia,can transformyou into an effectiveieader Second,leadersmustknow themthoroughlybeforetheycanhopeto selves comes Ieadothers.This self-knowledge throughlisteningto your innerv01ce,acfor who you are' ceptingresponsibility learningin geaterdepththantheaverage person,andreflectingon the uniqueex' you havehadthroughoutyour periences but they,too' areinevitable, life.Mistakes growth your and develop' cont bute to ment.

Third,youmustalsoknowtheworld World youknowyourself. asthoroughlyas comesthrougha hostof expeknowledge riences,lncludingextensivefavel, a re' with life,keyassociations wardingplivate edu' goups, continuing and mentorsand cation.

Fourth,You must allow Yourselfto emergeasa leaderby applyingto tie way you do youl job, the wisdomandinsight on life'sles' gainedfiom your reflections

True success in

tomorrow's leadership challongâ&#x201A;Źs rests

leaders to effectively coPe with three commonplace

ontrepreneuri3m, loyalty and the "20-3omethingl" workforco.

42

The AsianManagerI March-Apil/May-June 1997

skillsneededin today'shigh.techworld.

As we look to the future,the chaf Thesequalitiesarecontagious. your subEvenso,theythinktheyshouldcommand lengesfor true leadership in our industry ordinates will pickthemup andembrace instantvaluein the workplaceanddon't in the face of growing technological them,too; likero workllleirwayuprheladder. fhey changelies,in myvieq in beingsensitive Bfing out the best in staff:Thisen. alsowant as much aspossible as fastas to therealitiesof todayandresponding to courages themto expandbeyondself.im possible.

Andwhiletheywantnicethings, themin a pragmatic fashion. posed or artificial limitatjons, andexcelln theypreferfun to a workaholic,,)uppy', ln his book On Becoming a Leadel" ways that may even surprise youand "2o-somethings" both lifestyle.

Often, arecyni W Bennisenumerates 10elements which lnem; calandconcerned with themselves first. I consider anappropriate basisforsurvlval Inculculatea senseof ,.touch": Theyareusuallyneitherteamplayers in the21stcentury; Cultivatethe abilityto discernwhereme not risk-takers.

Whilesomeof ther! enry Manage the vision: Communicate external environment isheading andhow the passions of the 1960s,theyfeelover. yourvisionto others,recruitmeticulously, your organlzation must change if it is to whelmedby the huge overhangof the rewardandretrainyourpeople, andreor- growandflourish; shadowof workaholicsand resentpast ganizeascircumstances dictate; Adopt the long view: Keepyour genefations thatstuckthemwith a world Managethe risks: Createanatmos eyeson thehorizonandrefuseto become ofproblemstheycan'tdo anythingabout. pherethatencourages yourpeopleto take a slavet0 short-term,bottom-linethink, Raised on television, theyhavehaOa tite. calculated risks.Assufethemwith words ing; timeof exposure to doomandgloom.On andactionsthatthe onlymistakeis to do Promotestakeholderbalance:Bal a more pe$onallevei,manytemember n0thing; ancethe competingclaimsof eachinter, how lonelyandabandoned theyfelt com.

Encourageconstructive feedback: nal andexternalgroupthat has an interingftomunhappymarriages of whentheir Knowtheimportance of havingsomeone estin yourofganizatjon; parenrs divorcedfor example. and they in youriife,perhaps a spouse or peetwho Establishstrategicalliances:Recpianto put off marriage until they'resure will tell you the tuth; ognizethe valueandwisdomof creating it will beforkeeps.

Nonetieless, most,,20Nurture cfiticism:Surround yourself tieswith otherorganizations whosefuture somethings" feellifeis generally okayand with devil'sadvocates who will tell you is alignedwith yours. hopeto be, at least,as well off as their the difference betweenwhat you expecr Aswe lookto thefuture,thekeyreaoparents, probablybetter andwhat couldreallyhappen; ershipchalienge mustultjmateiyinvolve With their poor work ethic and a Displayoptimismandenthusiasm: peopleand the key to meetingthis "whafs in vital it for me?" attitude, why chailenge lies in making people lhe you bother trying to reach the ,,20leadresponsible and results-oriented; cusomethings?"

Firsroi all,makeno mis fiousandcommitted;and, dadngand dedi, take,sincemanyof theseyoungworkers catedin thedrivefordistance in success. a r eh a r d w o r k i nign,r e l l i g e narn dJ o y a l .

As we look to the Second, and moreimportantyou don't Ttfi Sri Dnti Dr. t.ifi Stc y j brcnmL,olt of t&,o future, the key havea choice.Theflowofqualifiedwork. < l h r t M | l n v , n t t tl a o 6 . t r , t t t i n i A1MCni,. ersintorheworkplace T']tt Sri Crh Ik Chcong. Ht is thc Chairnan antl isslowing.

Indeed. leadership Chief Evcutir| Ofiic,:r ttThc pn.ific Bnnk B(had. businesses arealready scrambling to find, Hc alsoholds stttior ltnsit'httsinbath husiltss ani challenge must hire,motivateandkeepyoungerworkers: lgora,',?rrarasaat.,s.

Thatmeans,like it or not, you aregong ultimately involve to haveto adjustandadaptto thesenew Llr is curn,jjtlv Chninnin of pn.ific ljts rnn(r people and the key workersandtheirvah)es.notthe otherway Btrhad, Pacific Mutuat Fmd Buhad, nntl Cnl)ol B n t A M a l n u , i n ,i h B h l . , t t t ; : D , I ' t t t t lC t t . t i t | , , ,t draund.Consideringlhe cosrof hiringand to meeting this ollnLl strinl Bnt* of Malavsia ltcrhad. Hr is0lsoa firingandrhelackof ablebodies coming Din:(lor of MalaVsian Trust.ts B h\d,BIWald vital challenge lics into theworKorce,it is economically pruVtntrrcs I 8 Il, Khizinih Nnsio al Bclnaa, dentto hangonto allbutyourworst,most in making the Cot).nitrcnt Offic.ts HotlsinN Corporntirrt, pNts fiustratingemployees.

C o r p o r n I L D t i ' L , l o p n r t S L l B l t L l ,K t ! n 4 j u I n n Accepttheirdifferpeople you lead Cuthri( Bhtl,l,irrt (Milavsia) Stln Bhd, Llnited encesanddirectyour energies into helpMnlictu R bber Estnte, nittl Gft,at Eastem Lifr, ingthe"2o,somethings" responrible and become produc. tiveandmotivated.

ConcludingRemarks As we look to the future, I am re, mindedof PeterDrucker'srathercasual remarkwhenwe lastmetin KualaLumpur notsolongago.Hesaidto me:youngman, l worry abouttomorow'sleadership be cause:"...not enoughgenerals are killed today:rheyslayedwaybehindthe lines andlerorhersdo rhefigndng anddying.' rrrec ve leaders arenol preachers: they aredoers.Theyjustdo it.

results-oriented; curious and committed; and, daring and dedicated in the dfive lot distance in ruccess.

TIn Sri Dnti Dt. Li has stti'L,d the F l.nl Cot,trn k'fi\ in i,arirus capncities. Hr Lras t t Dcp tll Cor\\'rot of Bfnk Negnra Mnlavna 0 Ll Mtnlher of tht Bonrd of Dirc.h .s of h; Can at Batlk frctn 1980-7994.Ht has alsLtbau iw,uruL,a 1L, h stl).til liroj(ts of tht Catn lontL,calth, tht IMF, lnd tfu INorlrI Bank. A hlulti-ttt:f,rrc holdcr totl scr,t:ml.Llucrt innl i stihtiotls itlctuding th?

U iiiersitv ol Mnlivi itl Sirgapoft tltd Haroald Unir)trsitt/, Tnn 9i Ddtd Dr. Liii hns tuet.,cd stx RoVal At,arLIs fot dlstir.qris/rcrl srrr,ice fL) the

Ma.ch-April/May-June 1997

TheAsianManaser

43

In China DoingBusiness for a developing reformt}Iefinancialsystem(bankingsec' and engineers LastNotember1996,TAM's Editor-m- scientists tor, moneymarket,CentralBank)while Chief met with AIM Alumni basedin country.Fifth, it enioysa considerable up severalkeylegalframeworks.

Shanghniand Beijing in int'ormal manufacturingcapability.Sixth, it has building havebeensubstaneconomic$owth So far,achievements an impressive on the impactof achieved roundtablesessions of a thorough con- tial givingthe impression styles, especially overthepastfewyearsandregisters APECon management process. in thekeyeconomic mastered in China.This is a t'ollow-upinte/rrcw tjnualimprovemenLs aresdlllagissues Someimportant it alsohashugere' Seventh, indicators. with threeof them,eachonegraduating quirementsin terms of infrastructure gingbehind:the reformof the Statesec' from a dit'ferentAIM program:Master andregional tor,therisein unemployment i n M a n a g e m e ngt r a d u a t eR n Y m o n d prolects. (e.9.,incomegapbetween disparities of Bariou, ShanghaiRepresentatiae andinlandones.Cityresiregions Tang: Its hugePoolof humanre- coasral B a n q u e P a r i b a s ;A d a a n c e dB a n k six umesas of Chinais dentsearn,on the average, Almosteveryaspect MnnagementProgrnmgraduatePhilip sources. ln much as their rulal counterparts)' T a n g , G e n e r a l M a n a g e r o f B a n k movingtowardsmodernization. a from process of shifting theory,the InternationalNingbo;andMantgement "socialist market He Liansheng: Chinahas been plannedeconomyto a DeoelopmentPtogramgraduateHe enthose leaving imply policy economy"could in executingits reform Liansheng,Directorot' the Research successful but Onecouldeasily terp seson thevergeof bankupcy, it Centerof the ChineseAssociatlonfor in the lasttwo decades. in the numberof progress in socialand alsomeansincrcases witnessremarkable Int ernntional Understanding. would obvi' people China which stabilify iobless Political, economicdevelopment.

Theleis consensus ouslyliketo avoid. In recentyears,China in thecountry.

What do You see to be Chinab prevails and and full confidenceamongthe people. h a s t i g h t e n e dm o n e y s u P P l Y compantive advantage? declslon thewholeeconomic Such favorablesituationwill ensure recenffalised It is expectedthat process in Beijing. in Bariou: Seven Points.Ftst,itshuge healthyand sustaineddevelopment to follow its current of 1.2billion.Second, China'sfuture endeavors.Chinais the Chinawill continue market:population pace' counffy policyfora while.butat a smoother its relativestability:China'stenitorialsense world'snumberone developing Its 'opening-up" mainlybecauseof the need for fresh of identityis suchthatthereis no altema' with 1.2billionpeople. supplywith the beginningof the tivebutforthecounffy'sinternalsituation policyprovidesa hugemarketto the out' money of Planandthe necessity de' Ninth Five-year Some93%of thepopu' sideworld.Alongwith rapideconomic to bestengthened. growth levels. sustainable of invest- maintaining theimprovement to a singleracialorigin: the velopmentand lationbelongs Chinahopesthat the currentecoforeign of volume the Han. Thisis uniqueforsucha largecoun' mentenvironment, at reasonable growth,ifmaintained nomic overme sameculture).Con- investmenthasbeenincreasing try (samelanguage, "overheadng" phe levelsto preventany in the past,the years. sideflngwhat happened nomenon,will be enoughto sustalnthe populationhasa profoundfearof chaos the What is the most siglrificant as' paceof reformsand,in turn reabsorb andis naturallylookingforpoliticalstabil' Largeamounts ity and economicdevelopment.Third, pect of economic r{orm in China unemployedpopulation. theflow are needed, investrnent foreign of a sfong senseolnational today? What are the Pt\osqects?

Chinapossesses durlevels high kept at of whichhasbeen destiny,that flows from its ancientself' "Placeof the MiddleKing' Bariou: ChinahasbeenPushingfor' ing the lastfour years(overUS$20 bilproclaimed hascon' to lion annually).Thegovemment of ward a seriesof structuralmeasures dom".Fourth,it hasa largepopulation 44

The AsianManaget I March-Ap.il,/May'June 1997

ffolledinflation:21.7% tn 1594,l4.g % in 1995and6.5%ln 1996.Reserves are now overUS$100billion.

wouldbe muchfreedom.

He Liansheng:As known to ail, Whatadlice would you China'seconomic reformwasinitiatedin give a junior manager workTang:Freedom to choose andava - 1979.Itstargetmodelwasto establisha ing in China today? abilifyof choicesin rhe livesof the Chi socialistmarketeconomy; that is, while nese.I tend to be optimisticthat there public ownershipremains domrnant, Bariou: Make conscious Chinawill relyon marketmechanisms to allocate resources.

Afterachievirrgsuceffortsto quicklyadaptto the cessof tie economicreformin the rutal fast-changing environment. areas,the enphasishasshiftedto the Whatsuggestionswould Manageby example.Establish you give anyonewho wants utbanaleas. personalrapport with key Now.theenterprises relorm,e:peto do businessin China? economicplayers. ciallythat of state-owned enterprises, $ thekeylink. lts goaiis to establish a tl?e Bariou: Takea longterm of enterprise management systemensurTang: Understand the view.Taketime to getto know ing independent management of rnelr cultureand be sensive to its Dusness operation, the market.Choosethe right theirresponsibility for differences. gains and losses.

Under tie new system, partner.Selectreliablestafffto the governmentwill not directlyinter. alleviatelanguageproblems). venein the business He Liansheng:Broaden andproductionacEstablish ftiendly rapportswith tivitiesofthe enterprises butmaintainits one'svisionon Chinat culture parheN. business macr0-control function.Whenconditions and history. To learn some permlt,enterprises couldformgroupings Chinesewill certainlyfacilitate system. lnese Tang:SelectyourChinese andadopta share.holding yourbusiness management and aspects involvea difficultp.ocess aswell partnercar€fully.

Maintainyour communication.

It is essential asihe mostsignilicanr to srepin economic senseof dir€ction.Patience and reform.Experiments know relevantlaws,rulesand havebeenconpelseverance.

Lotsof energy. ductedfor almostthreeyearsnow and regulationsrelatingto foreign Adeguate capital. somemeasures havelelded positivere lnvestnent. sults.

Moreover, thereisgederalconsenHe Llansheng:Fint,it is suson the urgencyandnecessity of the importantto find anhonestand entetprise reform.Wehaveeveryteason capablelocal businesspartner. to expectsuccess Tang;I believethereissocialcapital of the reform.

Second, oneneeds tohavealongherebut humanresources development Putnam is telm perception(for€sight) slow. once said that human and patimceandshouldnot expect bondry that charaiterizes a strong civil society signab ,,sociat capital", He Liansheng:AsI understand by to makebig moneyovemighl morc than iust human or intellectual socialcapital,it refersto the entiremareThid, it is not wiseat thisstage capital your In expefience, is therc rial, ethicaland moralresources with "social to dir€ctyourattentionsolelyon capital" in China? Conve$ety, whichrhe nationwill strivero realizea big citiesand towns.Onemay how would you characterize human commongoal.Havinggainedexperience from their sriccesses andlearnedlessons find moresuccess opportunities rcsources d.evelopmentin China? flom failures over past the severaj decades, in business in smattandmediumBariou:Humanresources peoplehavefoundtheirpath in China the Chinese sizedtoctns,evm in ruraltownaregenerally satisfactory Majorifyofsen- of economicdevelopment suitedto the ships.

10rpeoplecannotspeakEnglish.young Chinese conditions, thatis,to buildsocialoneswho can,lack experience.

Invest- ism with Chinesecharacteristics.

In this mentin humanresources is a goodmove. sense,I cansaythereis abundant,,social capital"in China.

March.Apdl/May-June 1997 ) The AsianManaser

45

ReviewandProsPects of ChineseEconomic Reform led Chinato seekthe Thedesirefor development truth from past practices, implementingreform and open@ uP to the outstdeworld

lead batewent on throughouttne counny Lecturedeliveredat the AsianInstitute modemtimeswhen the two $eat development China's MaoZhedongandPremier aboutthedirection ers,Chairman March31, 1qq7. af Management, on tne centering virtually Zhuo Enlaiboth passedawayin a year' shouldtake, "Practiceis the only standard that for me to andthe whole countrywasthrown into theme r is reallva gea pleasure J truth." wilh lheAsianInstitule sorowfui worry andlostmood;tne peo- cantestthe IT beassociated madetwo historicconDebate The o l I o l M a n a g e m e notn. e o I t h e l i n e s t p l ea n dn a l i o nw e r es i l l u n d e r _ s i e g e "culturalrevoludon" Butthe tributions: bothin thecountryandin there- theso-called schools of the First,correctinterpretation very strongdesireto realizethe four gionaswell. and Zhedong positions of Mao eco' m o d e l n i z a r iloi nnd5u s l r iaagl .r i c u l l usr cei.' historical ThetopicI wasgivenis Chinese anddefensemod- histhoughtin China'srevolulonandc0n' re- ence andtechnology, economic nomicreform.TheChinese "to seek was The conclusion and difficult ernization),a taskpromotedby the late sftuction. form is a very complicated facts."Thisseruedasa basisof thisreformhas ChairmanMao and PremierZhuowas truth from subject,not onlybecause and freedthe emancipation people's heatts.They ideological beengoingon for 18 yearsanda lot of deeplyrootedin the and slo' Chinesepeoplefrom controlof dogma' havebeenreached,but were tired of politicalstruggles achievements and gans;theywantedto getrid of thechaotic sm. areyetto beresolved manyproblems summinguP30Years Second, Prac in My lecturewill be situatjon.Thanksto a groupof leaders difficultiesovercome. there that to end ice, we drew the conclusion dividedinto five parts: (1) originof the China,they took decisiveactions "culturalrevolution"andled the na would be oo development if Chinakept oi evo- the reform;(2Jthreephases economic persisted on the old economic her doorclosedand lution of economicreformtheoriesand tion to embarkon the roadof to the economicsystem.The solutions reiorm: development. ofeconomic t 3Iprocess practices: system wereeconomic One questionalmostimmediately existingproblems encountered andchallenges (4)dilficulties up to the outside opening and reform andthe fu- emerged:how could we develoPour by thereform;(5)conclusions Couldwe developby adhering world. economy? ture. it wasthe desireto To summarize, thinking?Or do we to the old ideoiogical thatledusto seektie truth development ideas? needsomenewinnovative The Origin of the EconomicReform economlc implement andin deptnde frompastpractices; A comprehensive l o T ow a sd h i s l o r iYce a r ' C n hinese 46

The AsianManaget March-April/May-June1997

reformandopenup to theoutsideworld.

380milliontonsin I985. ket and profitskept by individualenter.

However, economic reformwasen, pdsesandpeasants.

Three Stagesof EconomicReforrn counteringobstacles in practicein mid.

Frommid 1980sto early 1990s, Cenerally speaking, the economjc 80s.Forexample,if the management of the secondphase,rhe guidingprlnciple reformin Chinastartedin late 1979.We an enterprise shouldbe moreefficient, it was a combinationof plannedeconomy canroughlydividethe periodinto three hadto respondto thepricesignals.

There- and marketforces.Unfortunately, there phases: foremarketshouldplayagreater rolesmce were numetousnew problemsthat sur1979to mid.8oswouldbethefirur officiallyfixedpricewouldnot gve man- facedafterseveral years,suchasoff-budg. phase, whichwascharacterized by expan, agers anyhelpfulindicato$reflectingmore eraryffansactions, smuggling,fake and sionofeconomic autonomies.

In tie rural efficientresources priceshould p00rqualityproducts, allocation. corruption andlinkareas, thismeantthattherewasmoreflee- be decidedby demandandsupply than i n g C h i n e s ee c o n o m yt o t h e w o r l d oom glven to peasantsto decidewhat by the statepricebureau.

We had to al, econ0my. cropstheyshould$ow, andaftersatisfy low themarketto playa larger rolein ecoThisbroughtus to the latestpedod ing stateprocurement quota,remailmg n0micdecision-making.

Weneeded togve of thereformin which, thekeydebatewas productswerefreeto be soldin the mar- moreautonomous powerandflexibilityto whethermarketconcepts couldbe intro, kets.In the urbanareas, ducedin the socialist i n d u s t r i a lr e f o r m w a s system.The prevailcentered on grattingmore China'sGrainOutput,i g7g-1996 ing viewwasthatsopowersto individual entercialism should not 50,000 p sesandallowingthem c necessafily tejectmarP 40,000 to keepa biggershareof principles; 30,000 ket market E the profits.In the mean. zo,ooo wassimplyan instru! time, shiftingindustrial : io,ooo ment to developthe productionpriority from 0 economy, whichany.

F @ O r O F 6 t 6 hea!ryindustrywas no 3 3 3 3 3 3 3 one coulduse.The l o n g e ri m p o r t a n t ,b u t conclusion of the de-'+morelnvestmentwas alcrain Output bate was that we locatedto sectorsclosely shouldestablish a sorelatedto people'sdaily ciaiist market life. The guidingprincipleof the reform producers soa contractual framework was economy. wasthattheplanshouldplaya mainrole workedout for enterprises. .Most srateMany peopleaskwhat this phrase m economicdevelopment whilethe mar- ownedsmall-and medium-sized businesses "socialistmarketeconomy"means.As I ket couldonlybea suppiementary instru. werecontlacted out to individuals.

A dual understand it, mostmarketeconomic conmentbecause peoplestill thoughtthat if pncrng sysrem wasjntroduced: price one ceptsshouldbe respected andobserved. we continuedto insiston socialism then wasnxedbythestatearwhichenterpises, Theterm"socialism" hererepresents three theplannedeconomyshouldbethepillar includingpeasants, shouldsell certain differentfeaturesfrom capitalistmarKer ofit. Evenwith thisideological constraint, quotaof thetuproductsto the state;the ec0nomy. e c o n o m i cr e f o f m a n d d e v e l o p m e n t otherpricewasdecidedby market forces First,thepoliticalsystem will bedifachievedgreatsuccessdue to policy andproductsthatexceeded stateassigned ferent. changes, sigtincantincreased agriculture, quotawereallowed to besojdin themdr_ Second, multipleproperty ow]lerandindus, ship with an trialproducemphasis on ThreeStages tivity. Take of Chinese Economic Reform publicownergraln proship. The 1979-mid 1980s d u c t i o na s mid1980s-early 1990s present economyal. early'1990sanexample, lows pnvate, it increased Expansion of Economic Combination of Establishment of collective and Economic fiom 300 Autonomies Planned Economy and Socialist Market state ownelmilliontons andMarket Forces Economy ship to coex. i n 1 9 7 8t o ist, but some March.April,/May-June I 997 | TheAsianManager

47

ductivity, the Chinese basicand importantindusGovefnmentdecidedto triesshouldremainin state Space Per Caplta Llvlng Chlna's abolishthe collectivepro' ' hands,suchasdefense,en' 1978-1995 ductionconceptthat had coaland ergy,ftansportation, adoptedfor more been 25 oreminesandtelecommuni ard to than two decades E20 cation.However,it doesnot E 1 5 individual lease lands to meanthat stateshouldone I rn farmer'sfamilies.Under hundredpercentown every 3 5 this new arrangement, enterprisein thesesectors.

0 @ O l , ' ( O F 6 < D O r N d t t l O eachfamilywouldhavea Stateownershipcanbe repF @ e o @gr @ â&#x201A;Ź o t o t g t qt c t o t o t <t) o) ot o) c) o) ot o) o or o pieceof landailocatedto resentedby majodtyshares to thenumber it according -------a__}or otherforms.

Rural urban in thefamilyfor of laborers Third,to stesson geta long period.The state ting ch together.We can. eachfamilyand sign a conffactwith not allowa handfulof peopleto become tionalsffength;whetherit is in favorof would quota.thefam' rhaLuproa certain dcherandricherandtherestof thepopu' economicgrowthandimprovingproduc- specify ro Lhe state at a fixedprice, to ily shouldsell lationpoorerandpooreror onepartofthe tivity;andwhetherit is advantageous of the peoplesliving anlthingin excess,thefamilyhadtheright very fastleavingsome the improvement countrydevelops pansbehindsubstandally.

Thispolariza standards.As long asit canmeetthese to decidewhat to do witl it. lt couldbe is a goodone.Thisis soldat the heemarketat whateverprice dresystem andregionswill re' criteria, tion in thepopulation sult in socialandeconomicinstabilityin rhetruthwe foundout fromthepastprac- decidedby the market.This is a well' kJJownfamiu contractresponsibilitysys we [ces. the countrysowe will do everything tem. Thissystemwasinnovatedby peas' can to preventthis situationftom occurThe Processof the EconomicReform antsand had beenperfectedduringthe rng.

T h e C h i n e s ee c o n o m i cr e f o r m firstphaseof the economicrelorm.After Havingsaidthis,it is by no means goup peo' started fromtie coun[yside.Before1979, adoptionof this new system,agriculture of to saythatwe donotallowa grewquicklyfrom300million sys- production pleor a regionto berichflrst.Actuallywe ruralChinawasundera commune ownedandpro- tonsin 1978to 480milliontonsln 1996. encouragethosewho can make them- tem.Landwascollectively increased incomeper household to d0 so.Whatis being ductionwasconductedalsocollectively. Average selvesprosperous than in 1978 to more give 133.5 Yuan incenfrorr pe$on did not enough or a This system hereis,onceone emphasized 1900Yuan,14 timeshigherthan that of groupof peopleor a regionbecomes tivesto farmers. in the prol8 yearsago.Percapitalivingspace Aiming at improving agriculture wealIhy,theyareobligedto assistthe oth rura.larcasincreased ers to catch up with from eight square tfrem.ln doingso,we 1994-1996 Asset Investment, Total Fixed China's metersin 1978to initiated have 21 squaremetersin relations besistership 1996 1994 1995 1995. tween rich and poor Total lnvestment('100MYuan) 17,042.94 20,019.26 23,662.77 In order to citiesandprovinces.

ForeignDirectInvestment Afror f.trh/ vprrs (in 100MUS Dollars) 339.46 378.06 420.00(estimate) learn from foreign (in 3,137.903,486.00 Yuan) 2,817.52 100M expedevelopment of socialistpractice riences,we introandmorethan a dec25,000.00 ducedthe practice reforms, adeeconomic 23662.77 20, 20019.26 spe. of estabiishing we have concluded 15,000.00 zones cial economic that the criteria to 10 3138.9 (SEZ).The ideaof judgethe success of a is to set up a SEZS society arenot socialist 1996 1995 1994 numberof experi arguments ideological Forelgn Direci Invâ&#x201A;Źstmenl (100M Inve3iment (100M Yuan) I lotal m e n t b a s e sa n d but whetherthe sysYuan) grant them with to entemis benef,cial policies to a]special nahanceaggregate 48

The AsianManaget Maach-April/May'June 1997

low foreigninvestrnent stateconftolthe developandfirmsto operate in China's &vin$Deposil, 197E.'1996 mentaftertheconuactual (Year endbalance, 100llYuan) theseplaces,so the period?

Whowouldcheck restof thecounuycat: the managers'behavior?

40000 first, watch how the \ryhat couldbethe penalty Year Udan Rural 30000 { 1978 155 56 foreignenterpdses are if the contracttargetwas E 199630,9517,549 managedand opernooo not met? !0 I ated;and second,to In the early1990s, F roooo seeif thereis an)'thing - - t t t we beganto think about 0 we can learn.Therecorporatization whilesilll ,|984 19781980 19E5 1986 1987 t9881989 1990 1991 19921993 1994 1995 1996 fore,advanced techallowing contractsystem nologyand managet o b e u s e d ,b u t s o m e Uft6nI Rural ment knowledgecan chalgeswere alsointodr.ad r rop' be transferredto the - - - - - . T.|.lrritu . - - . - - . ,rhp -.-? wholenation. ties,sixtiesand seventies in China.But erty rightsandoperational responsibility, Initially,SEZdeveiopment wasnot oncethe economyis opento the outside, andto distinguishobligationsandbenefits very smooth,but later, showedUemen- whichis aninevitable phenomenon, once betweenowne$andmanagement, it was doussuccess.

TakeShenzhen asanexam- the economyfacesforeigncompetition, b e l i e v e dt h a t t h e s o l u t i o nw a s t o ple. Beforeit becamea SEZil 1979,it theplannedsystemwill no longerbework- corporatize enterprises.

It doesn't mean wasa smallcitywith onlyabout310thou- able.Sothe systemhasto be changed. that statecannotown enterprises, but it people per with people sand capitaincomeof606 In the beginning, werestill doesmean that stateor government Yuanandtotaltradeof US$9.3M.Seven- very cautious,so that reformstartedin shouldnot run enterprises.

Ownership yea$ teen later,Shenzhennow has be- smallandmediumsizecommercial enti- must be separatedfrom management. comeamoderncitywith 3.58millionpeo- des,suchasretailshops,smallfactories, Govemment's lunctionis to setup a fair ple, aboutUS$408annualforeigntrade etc.Theformof thenew systemwasp/o- andhealthymarketenvironment. andper capitaincomeabout26.5 thou- ductioncontractvtiththe enterprisemanPricingsystemis alsocrucialto ensandYuan.All fiveSEZsnow havebeen agersspecirying theconditions.Duringthis terprisereform.If managers cannotredeveloping very fastandachievinggreat confactualfiveyears,a manager, in gen- ceivetherightpricesignals, theywill not success. polieralhad the autonomyto run the enter- be ableto changetheir operational Aboutmid-1980s, we starteduban prise. ciesaccordingly.

Beforethereform,prices reform,focused on enterprise refom. PreFor the lnitial years,this system weresetbythestate.Afterthereform,for viously,almostall enterprises werestate workedwell, but problems alsosurfaced: quitea long period,we alloweda dualowned, central and local government Who was ultimatelyresponsible for the pricesystemto exist.Today,exceptfor a owned.Productionwasplannedaccord- assetsof the enterprise?

How couldthe few commodities,maioritypriceshave ing to governmentorbeenfreedfrom state de$. The industial procontrol.Eventhose pricesundercontrol ductionwas organized qth! Fmtn E!ilre. R..n r, tgl$i$t stdctlyundera national havebeenincreased sevFtnu$l plan preparedby the times,verycloseto eral r200 StatePlanningCommisthemarketlevel.

1000 sion.Enterpdses neither Another aspect of 800 hadautonomies in organenterprise reformis to !

600 izingtheirproduction acinfoduceforeign invest' 100 tivitiesnor hadanyobliment.By the end of F 200 gationto makethef prod1996,wehadapproved ucts. Therefore,there 0 foreign investment projects wasno market,no comabout300thoupeution.If the economy sandandtotalforeign ----+-FoEx Reserye is closed,it probablycan capital nearly US$200B. work, asit did in the flfTheseforeigninvested

I

t

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TheAsianManager

49

tio amongthemandan an' haveconenterprises nual gowth ratewas also g$ ffibutedsignificantlyto &hdoqIg'7&l Climt Gt{P indicatedin the contract. the economicgrowth contdb' This arrangement t00.0 andreform.Theyhave the 600.0 uted to decentralize broughtin not only 500.0 the power rejuvenate and and new technologies 100.0 economy.But it causedat skills,but managerial t00.0 thesametime,a lot of Prob' comPetition 200.0 intensified one lems.Themostserious t00.0 in domesticmarket. government 0.0 the cental was Economicefficiency ! o o o r N O { O l C @ 0 o o l . . o o o o o o o o o F O O â&#x201A;Ź O hadbeenshrinking revenue o o o o o o o o o o o o o o 1mprove0.

The shareof dfamatically.

To smoothen -----l- GNP/100 ----4-GNP Index (Currenl) govelnmentrevenueto reform, the enterprise from25.6% GDPdeclined the socialwelfarearin 1980to 10.7%ir' 1995 rangementmust also Tosolvethisproblem,a new round In the pastfour portionately. be changedaccordingly. in 1994.It One of the centerPiecesof urban of tax reformwasinaugurated welfarehavebeen the people's decades, finan' the taxeswhich shouldbe col' stipulates pro- reformis reformin taxationandthe Govemment responsibility. thestate's govefnmentand ro videsvirtually everyservicethe people cialseclorWirhrespect the laxalion, lected by the central no governments.

The taxes thoseby local pen- beforethe reform,.therewasactually medicare, suchaseducation, needed, would whichwill besharedbetlveencentraland because all revenues employees tax collected, sion,etc.Welfareof enterprise Posi government andwhat localgovernments arealsospecified.

A con' be handedoverto hasbeensuppliedby enterprises.

Central by the gov' tiveresultshavebeenwitnessed: glomerate in Chinawill haveits own edu' you needwould be allocated personal government revenues $eatly increased. t0 unr emmentasweil. Thetewasno cationfacilities{fromKndergarten was salary is vital to the ecoeveryone's reform tax, since Financial income shops.policesladons. versirythospilals. pay. nomicrestructung, but it is oneof the etc.It is very low, it was in fact an after'tax restaurant, andtheatres, cinemas As everything. reforms.Therefore,it subsidize The State mostcomplicated would not only an enterpdsebut a society.ln andcare' themainsup- hasbeenproceeding cautiously reformdeepened, is a city. enterprise onegiantenterpdse manycases, was di in China must be plier govemment revenue system The financial of fully. cannot Undersuchsystem,an enterpdse leadto tax constructedin line with the centrally which necessarily be competitiveand efficient'sinceit is versified, wasa plannedeconomicframework.Underthe early tax arrangement giventremendoussocialobligations.ln reform.The bank' system, scheme.The centrallypiannedeconomic orderto reducesocialburdensof the en' kind of a conoact-sharing a degovernments than other government, local was nothing ing service a socialsafety central we needto develop terprises, ra' positcollector, anda cashwouldhavea sharing an accountant ftom andenterprises netto takeoversocialresponsibilities government.

So ier of the This social enterprises. thebankingstructureand safetynet includesPen' functionweresimpleand sion fund, unemploy1978.'1996 China'stmports& Exports, l i m i t e d .B e f o r e1 9 7 9 , armentfund,medicare (100i,| us$) therewasonlyonebank: The other rangements.

Bankof China People's 3000 facilitiesalsoneedto be (PBC), bothascomacting 2500 passedon to relevant mercialandcentralbank.

2000 but it takes agencies, 't500 When economicreforms timeandneedf,nancial func' snrted,commercial 1000 s u p p o r t ,s l n c et n e s e to be separated. had tions 500 are subsidized services 0 Fourstateownedspecialb y e n t e r p r i s e sC. u r | n @ l - . o o o F N ( ' t | , ' @ - 6 b @ c o o o t o t q t o o o t - @ ized bankswere conse; 6 o o o o o o o o o o t o o rently,fundsare raised PBC quentlyestablished. individuby requesting lmports bank.

I a central I Exports wasmainly andgov' a1s,entefprises A twotier bankingsystem ernmentto sharepro50

TheAsianManager March'April/May-June1997

wasftamed.However, C h i n a ' sP e r C a p i t ac N p , t 9 7 8 - i 9 9 6 theissuance of T-bills,fithisreformwasincomnancialbonds,industrial pletebecause eachof bonds,stock,andothe the four bankscould formsof securities to fosonlyoperate in its own ter economicdevelop. lield, worked as a ment.With thesesubmonopolist with very stantialdevelopments of limitedcompetition fuancialinsnuments, the andoverlap ofscope of basefor financialmarket business.

Havingsaid hasbeenplaced.

Asa rethat,we alsomustrecsult,twostockexchanges ognizethatno mattet wereput into operation how imperfect thisrein 1992.Thesecondary _ ----a-P€. Crpir. GNp structure mightbe,it is markethasenhanced litheflrststeptowardsa quidity,accessibility and modernfinancialsystemandreplesents nesef,nancial markethasindeedbrought atffactiveness of securiues.

Therefore, it theconclusion of thefi$t stageof finan- mcompetition, advanced banking technol- broadened financial resoutces andsetancialreform. ogyandmanagerial skillswhichwill have otherimportantbaseforbuildingthemarIn the1980s, theChinese economy profoundimpacton the financialopera- keteconomy. experienced an averageg% annual tionsin thecounw.

Fifth,China'sexchang€ s],stem has growth, whichgenerated emendous deFourth,Chinahasbe€nmoving experienced fundamental changes in the mandforflnancialseMces.In responding fromindtecrfinancing todirectfinancing lastl8 years.

It wasundercomplete conto thisdevelopment, thefinancial secbr byallowingissuance ofvarious papers and trol until early1980s.Thena dualexenjoyeda fastgrowthin theperiod: establishing twostockexchanges in Shang- change rateandcurrencysystemwere First,new bankshadbeenestab- haiandShenzhen. in[oduced.Duringthattirne,therewas lished.Between 1985to 1994,another The financialmarkethasbeen onecommefcial exchange ratewhichwas nin€commercial banks wereopened. gradually emerging afterfortyyearsof ab- higherandoneforeigntrad€ratewhich Second, non-bank financial institu- sence.

Themoneymarket,fi$t esta-blishedwaslower,anda foreigncu encycertifitionsfloufishedftom zeroto morethan in 1985,hasremained asan inter-bank catewasissued to prohibitthe Chinese 370.Theyhaveprovided various sernces markettill today,butit will bea mainin. citizens ftomkeeping foreign curencies, t0 thefastgowingeconomy andsupple- sfumentthroughwhichinterestliberali. soall foreignexchange wouldbe in the mentedseMces extended by thebank. zationwill beproceeded in the coming handsof the government.

As tradelDerEspecialiy, 56,000urbanandruralcredit years.Sincemid.l980s,morethan400 alization develops andeconomy becomes cooperatives havedeveloped rapidlyand billionRMBhavebeenmobilized throush moreopen,exchange conuolis moredifgrantedfinancialservices flcultandunnecesary tomainto avastnumberof towntain.Tosolvethese problems, shipandvillageenterpdses ,1978.1995 dualcurencywasabolished China's PerCapita Consumption, andthenon-state sector. in the early1990s,two ex(constant price, index,,1918=100) Third,foreignbanl6 changeratesweremergedin havebeenintoduced into 1994andthe RMBmadea China:fromthe flrstrepconvertible currencyunder resentative officeestabcurrentaccounttwo yeals lishedin Beijingin 1979 laterin 1996. up to the endof 1996, Sixth,the Chinese fi. therewereabout150for. nanciallegalsystem hasbeen eigninstitutionsor bank remarkably reformed.In the branches operating in 24 lastten years,"centralbank opencitiesin China.Forlaw,' "commercial banklaw," -All Residents eignnnancial instituuons' negotiable insfumentlaw," participaton in the Chi andmanyregulations have

E F E F F S g E E E S E E E

March.Aprtl/May-June 1997 | TheAsianManaset Sl

beenput into effect.

Theselawsandregulationshave consti tuted a basefor rule of law in financialsector (6vonih

,ftpr

yearsof hesitation, stateowned speciaf izedbanl$havefinally marchedon the road

15

to

EEEEEEEEEFEEEEEE$EE

of commercialization.

S e v e r ap l olicyori' ented banks have beencreatedto take lendingrequested over thosesubsidized by the Government.This allowsstate owned commercialbanksto compete equallywith otherdomesticand foreign banks.It goeswithout sayingthat banking relormwill not be ableto proceedtur' ther withouta plofound stateenteryrise

reform.

Lastlyand most importantly,the monetarypolicystipulationandimplementationhavebeenrevisedconstantlyPrior to the earlydaysof 1980s,the monetary policy in Chinawas virtually a cashand credit plan.The monetarypollcy has evolvedfrom a passiveand directmode of dhectaIIdindfect into a combination suumentsandfurthelto now placingmorc emphasisoq indirectintervention.The Chinesegovernmenthas increasingly on the macrorole of monetary stressed policyto sustainable Srowth.I believeafyea$, Bankof China, People's ter several will be ableto conductmonetarypolicy, flnanciallegulationandeconomicadjust' mentthroughopenmarketoperaons,in' terestrate and exchangerate and other indirecttools.Thereare manyotheractivities suchaspa)'mentsystemestablishment,banKngsupeMsion,financialsta' risucsdatacollecdonandpublicarion'fi' raining, andpersonnel nancialeducation financial in etc.which ale alsoimportant reform.To completeflnancialsectorre' form,therewill benumerousthingsahead reform,stengtheningfi' of us: insurance flnancial developing nancialsupewision, 52

actionsrequesta substantialamountof finan' China's Inflaiion 1978-1996 andit will cialresources to ac' long time takea cumulate sullicient f u n d s .T h e d i l e m m a hereis,on theonehand, the economicSrowth which can generateresouces,will not bePossible unlessstateentet' prisesundertakefunda' ----+ lnflation Rate mentalrefolm.On the otherhand,without sufany senousen' support, flnancial markets,constuctingpaymentsystem' ficient conductlnga soundmonetarypolicy,to terprisereformcanhardlybe cardedout. nameonlya few of them.All of thesear- A breakthroughto this dilemmawill be eas,amongothers,hasto be takeninto the key for the economicleform.It has and timely actionsare beena major difficultywith which we consideration offinancial havebeencopingin thelasthvo decades. needed.Giventheqomplexity Havingsaidthat,therearealsosome do not expectit can reform,I personally theseproblems causing reasons legitimate in a shortPedod. be accomplished in China.State enterprises in stateowned usedto be the major ChallengesEncounterâ&#x201A;Źd in Futurâ&#x201A;Ź Re- ownedenterprises to staterevenue,eventoday' conffibutors form still collectsabout60%of its Letmetouchuponsomedinculties govemment Thispractice rc- taxesfromstateenterprises' economic in undeltaking andobstacles greatlyundercapi' makesstateenterprises forms. penny it earnedwas First, on stateenterpflseleform. talizeddueto every when peopletalk aboutstateenterprises sunenderedto thestatebeforereform,and hasbeencollected ofitsrevenue it is quitenaturalto heal negativecom- 70%-80% exisung astaxesby the stateafter reform. Heavy ments.ln viewof manyproblems bythemresuictseI will be sur- taxburdenshouldered in stateownedenterplises, to develop prisedif most peoplehave positivere' douslythe abilityof enterprises old ro replace equip' marks.Beforewe pick up this subject, new technologies, pleaseallowmeto narow downthe scope ment,to train employeesandto hire high of stateownedenterydseionly to those quality personnel.Stateenterpriseshave They in China,sinceI havelittle knowledge alsoserved,socialwelfaresuppliers' in havegiven almosteverysocialfacility to of stateenterprises aboutrie situadon which are extendedin thet employees otheleconomies. in othercountriesby either governmentsor What are the maiorProblems If andprivateagencies. redun- bydifferentpublic stateenterpises?Low efflciency, also othercountrieswere poorqualityof products' enterprises'in dantemployees, it wasdoubtfulthat they given tasks, these equiptechnologyand hugedebts,obsolete Tosolvethese couldbe efficient.Thesedifflcultiescanmentard badmanagement. themselves which not be solvedby enterprises a system we needto develop issues, wilt be ableto takecareof unemployed andthey hinderenterpdsereform. we need TotackletheseProblems, workers and PensionreciPients. of moststateenterprises a clusterof specialpolicieswhich have Recapitalizadon is alsoa crucialstepln the reform.These beenput into expedment.For instance'

The AsianManaget I March'Apfil,/May-June 1997

we askindividual,employer, andgovern- clining.However,agriculturehasbeenand future. ment to sharethe costof establishing a will be the basisof the Chineseeconomy Beyond point,economic a certain pensionscheme.Recapitalization is nec- dueto theneedto feedI .2 billionpeople development cannotbegenerated onlyby essaryfor manystate-owned enterprises. anda coupleof a hundredmillionpeople physical investment, humanresources de.

Several approaches aretriedto reachthe employedby lhe sector.So emphasis on velopment will bemoreimpoftantfor furrecapitalization goal,such as issuingof agiculturaldevelopment is goingto be thergrowth.Varlous resources haveto be jnvesmem continuouslyour stock,increasing government maiolconcem.Toman- mobilizedto be put into educationano in technological innovationof stateenrer- tain growthmomentum,andto keepin. other formsof tfaining to improvethe prises,mergingenterprises, etc.Thisyear flationundercontrol,relativeheauern- qualityof the population. is the yearof enterpdsereform.The gov- vestmentin the agiculture sectoris deEnvironmental issues havebeennemmentis detefmined to carryout enter_ manded.The porenrial of adoptingad. creasingly stessedbytheChinese govern. prisereformandtry everypossibleway ro vancedtechnology in agricultureis huge mentandotherinternational andnational revitalizestateenterprises.

Thesuccess of andverymuchneeded.Dissemination of organizations.

Due to the limitededucaenterpnse restructurjng holdsthekeyfor advanced technology to individualfarm. tion of the peopleon this issue,lack of the wholeeconomicreiorm.After eight- erswill be crucialto increase agriculture technological andfinancialresources ro aoeenyearsaccumulated experience in con_ productjvityandproductionto meerne dressenv onmentalproblems in thepast ductingenterprise reform,I amprettycon- needsof economicdevelopment.

Unless andmoredevelopment,oriented thinking, fidentfor theprospects of thisreform. agdculturehasa fairlygoodperformance the currentenvironment situationin Second, the flnalcialsectorwill be in theforseeable furure,China'seconomlc Chinais serious.Thank to the diligent anotherdifficultareato dealwith. The development will not be smooth. and continuouseffortsmadeby the gov_ Ooublehereis if thecounfy wantsto deInftastuctureconstruction will be ernmentand environmental promotels, veloprelativelyfaster,it needsa well or- vita.lto China'seconomic development in thebudgetary allocation protect to theen. ganizedfinanciaisecrorsupportedby thenextcentury.

Theinvestmentdemands vironmenthasbeenincreased signiflcantly. physicalandhumanresources, but China in Uansportation, energyandtelecommu- A coupleof yearsago,the Chinesegovhasnoneof thesenecessary physicaland nicationsectorswill well exceedthe do_ emmentarnouncedthatUS$25Bwill be humanresources to allow the financial mesticability to supplythat amountof protectionin .injectedinto environmental marKetto maturequicklybecause it has capital.How to build a tair envilonmenr years. next five beennon-operating for morethanfourdec- t0 attract sufncientforeign direct invest- .the Therearealsootherareaswhich are ades.Howevelif theinancialmarketcan- mentwill beour principletask in thenear indispensable to a successful economlc not besetup,how canfinancial reform,suchassocialwelfareand assets in people's handsbe motax leforms. bilizedto financedesiredeconomicdevelopment?

Giventhe The criteria to judge the success Achlelement and Ptuspects risksinvolvedin financialliber, of the ChlneseEconomicReof a socialist society are not alization,the only feasibleanform ideological arguments but swerto thisdilemmais to guide It hasbeenalmosttwenty financialreformcautiously. whether the systerh is beneficial BeyearssinceChinastartedecoforethefinancialmarketcanbe to enhance aggregate national nomicreformandtheopendoor well established, a soundlegat policy.

Looking back,a greatsucstrength; whether it is in favor andsupeMsorystucturemust cesshasbeenachieved.

Toillus. of economic growth and improvbe put into place,otherwisean tratetheseachievements, please unpredictable fitancialcrisiswill ing productivity; whether it is allowme to giveyou somefignot onlyruin the hopesof eco. ures.TheGDPincreased advantageous to the improvefrom nomic $owth, but will cause 451.8 billion Yuan in 1980 to ment of peoples' living standse ous politicaland economic 6770billionYuanin 1996,15 instability. ards. This is the truth we found timeshigher thanthatof 16yea$ Chinausedto be an agrifrom the past forty years of soago;percapita income alsoexpecultural economy.As the rienced a fastgrowth,ftom450 practices. cialist economy industializes, agricul.

Yuanin 1980to 5641Yuanin turalshareof GDPhasbeende- .

1996.

Foreigntradevaluein

March-ApriyMay-Junet997 | TheAsknManaeet 53

In 1996,totalfor haveservedthecounfy asa windowand further reform. I am alwaysoptimistic 1980wasUS$20.64B. eigntradewasmorethan US$2898and bfldgebetweenChinaand other coun- aboutthe future. in 1996.In 1978, tl1es.

US$108respectively a dualsys- Excerptsffom the Open Forum Sixti,we haveadopted therewasno familywhich hada colored people criticize TV set.Todayin the urbanarea,colored temduringreform.Many '97 (Phllippines): TV is no longera luxury item. Chinais thismethod.I havediflerentviews.This Vi,gtl Nety, MDM refe$to two p cing,bwoex' Thankyouforthatveryinspiringandvivid now tie no.1producerof coloredTV sets duals),stem andttvo in- pictureof Chinaandtheverybullisheco' such changerates,fwo currencies in theworld.Otherhomeappliances pracdce, In thedual nomicoutlookthatyou haveiustpainted asrehigeratolvideoplayer,taperecorder dusfialorganizations. is actuallya bridgingexer' beforeus. I think economicprogress and even CD playerand video camera arrangement abolish- wouldbdnglotsof emplolmentopportu' havebecomepopularin the citiesand cise.It means,beforecompletely ing the old scheme,we allow it to con' nitiesandwe want somedayto work in coastalareas. changes, yourcounry. so, what can we concludefrom tinueto exlstwith thenecessary while a new systemis strugglingto yearsof successful reform? eighteen First,any reformprogrammustflt emerge.The old systemwill be phased Ii Youaremorethanwelcome. inthe country.We out graduallyastie new onesprouts. situauon to thespecific Lastly,the benefltsof reformmust Ne4l.'Myquestionreallyis likethis. The certainlywill learnftom othercounfties Chinain itssheer andcultures,but cannotcopyothermod- go to the peoplesincethe peoplearethe worldoutsideconsiders and vasmess ofarea peoplea bigmar' els. ket. But,it seemsthat thisopeness Second,from our experi' that Chinais showingat presentis ence,the reform has to be a lookedat by count esabroadasnot gadualprocess, no matterwhat of beinga very clearmanifestation it in' thestartingpointis,because Fromone point of collaboration. volveschangesin almostall asview,it is a threat.Chinaasa marpectsof life,anyideato flnishin a but politically, ket is an opportunity, few yearsis boundto fail. militarily,alsoa threat. Why did I Third, due to agdculture's s a y t h a t ?C h i n a ' sp o l i c yi n t h e importanceand the realitythat in Rwandancrisis.They abstained economy, Chinais anagricultural In the tribunal. votation for the so economicreformshouldstart againin the theyabstained Sarajevo, fromthea$iculturesector.It will intervenmilitary and humanitarian risks. tremendous not only lay dowt the baseson woddinvolves Li Ruogu: Opening upto lheoutside tion of theUnitedNations.Andthe cangrow,but whichtheeconomy Iatestis Albania-China againab' the basicneedsof huit satisfles smbilizing society. basisof reformandfromwhom the sup' stained.Couldit be tlat Chinahasvery manbeings,rherefore and motivesbevestedinterests Fourth,giventhe risksin reform, port for reformcancome.If maiorityof particular How would this our expefencetellsus that it is betterto thepeoplecannotbenefitfiom thereforrn, hind its sheerstrength? with the be reconciled of China image havean experimentfirst, duringwhich tie reformmustbewrong. of Chinatoday?

Havingsaidall of thesethings,what openness peoplecar accumulate thenecessary skills reandknowledgeto mitigatepotentialrisks wili bethelutureof China'seconomic has Zij First,thankyou for your questions.I which think a leform pushed form?

Don'tyou across the forward whenreformis The broughtsucha greatbenefitboth to the feelthatsomeof themyouanswered. c0untry. isthemassmeeconomic countryandto thepeoplecanbereversed? problemin anotheraspect, Fifth,we sel up special "no." We have dia. The massmediatodayis controlled zonesto learn from foreigncountries. The answeris absolutely ThroughtheseSEZs,we studyforeign overcomeenormousdifficultiesin the by Westerncountdesin general.Sohow of reform.We rnayhavenumer- can you hear from the other people's practices: if theyaregoodandsuitableto process to copewith downtheroad, voices?lf you turn on yourry andra' to the ousproblems us,we cantansferthesepractices thatoc- dios,youhearBBCor CNN,UnitedStates restof thecounty; if theyarenot good,it butwe will not retreat.Problems will not alfectustoomuchsinceit is only cured duringthereformandwerecaused NBC,ABCandalltheseotherbroadcasB. of China'sintentionsis dis' in smallareas.The'seSEZs by thereformcanonlybe solvedthrough Sodescription implemented 54

TheAsianManaget I Ma.ch-Apr /May'June 1997

seminated by thesemassmedia.It is very Westernoriented,which is obviously not whattheyshouldbe. YoutalkaboutChi. nas abstentions in the UnitedNations.

Unfortunately, I'm not the Foreign Ministerof China.SoI probably wilt not be ableto givesatisfactory anyour swerst0 questions.But I think theideabehindthese abstentions is generally thatwe opposethe inter ventiont0 onecountry'sdomestic affairsby outsideforces,no matter if it is theUN or another power.So I think rhatis not a veryaggressive pointof viewbut ratherthe cooperativepointof view

ond question,I do not havethe statistics factorsin orderto sustainthe favorable at this moment.But annualgrowthrate growthratewhile still be ableto curo 0r for thesefivespecialeconomiczoneshas lowerthe inflationrate? been30%to 50%annually.

Zi Thequestion ishowwe cannurture thisdevelopment while keep. ing the inflationstill low.Financial sectordeveiopment is crucial.Since we lack the experiences and resources, we develop theseareas very cautiously.

ActuallytheChinesefi nancialsectorhasbeenopeningup v e r y q u i c k l yc o m p a r e dt o o u r neighbors, SouthKoreaandJapan.

TheJapanese financiajmarketwas stili veryclosedthen,when our fi, lhebackground: nanciaimarkethasbeenspeeding opttrnistic aboutthefutureof reform.

Mayor Nibir (lndia): Wearealso up openlngup to theoutsideworld. undergoing thesameprocess ofeco This involvestremendous risks.So nomicleformin lndia.I havetwo ques we haveto concentrate on our legalaslions. First,what is the impactof the Catherine Chetz,MBM,9B (peopteb pects,financial supervision andfegulation, reformson the migrationfromthe rural Republic of China)..Firsrof all, I'd like certainliberalization in the financialsecareast0 theurbanareas; andsecond, what t0 respond to ourfriend.I thinkthatChina tor within the capacity we canmanage. is theshareof thesefiveSEZS in the total hasmorethan5,000yearsof historyand growthof the economyof the country. the Chinesepeopleshavemanyyearsof Kusuma Adinugroho, MDM '92 (lnpainfulexperience aboutwar. I think,the donesia): SpeciaiEconomic Zonesin ai Thankvoulornv Inendfrommygear Chinesepeoplelovepeaceandwe cher- coastal citieslikeShenzhen havebeensuc, neighbor, India. Foryourfirstquestion,I ishpeacejustlike all peaceJoving people cessfui.

How youwill manage onenation think our emphasis for the development all overtheworld.{Applause) with this systemwhen tlte systemwith pro(e5s istha we d ratherenco-rage peoTogobackto my question, as Chi. the citiesare different?Secondly,how pie to stayin theirhomesthanto encour- nesewe havebeenexperiencing a drastic aboutthe othef landlockedareas,what agethem to move to the city approach will you implement? centers.The approachwe took or havebeentakingjs to develop Zr',.

Maintainingthesetwo systems ruratareas intourbanareas.

And is one of the featuresof the Chi ro oevetop moreopportunities in nesereforms.Weailow thesesysthe ruralareasin orderto satisfy t e m st o c o e x i s tp e a c e f u l l yI n. lhe demand.Migration to cities Shenzhen and the otherspecial will createtremendous problems, economiczones,we givethe local unemployment, slumsand the governments special policiesand crimes.Sowe thinkit is a bettef therightto do something.

Butit is ideato developthe ruralareas. only in thoseareasthesepolicies Actually it ishappening in China, areallowed.Theresultis thesear many mtgrantworkersin the easdevelopveryfast. Asyou had coastal areasnow alfeadyarego- Catherine Chenafllrming thattheChinese-herish observed, peace. in the interiorpart of ] ing backto their hometownsto China,theirdevelopment hasnot developtheir own businesses from the impfovement in both politicaland eco beenas fastas the coastalareas.In the s k i l l sk.r o w r e d gt h e e v , e a r ndeudr j n g t h e n o m i ca s p e c t sI .n o r d e rt o p u s ht h e nextfew years,ouf government is going workingperiodin the coastajareas.So I progress evenfurtherasa financialexpert to concentrate on the intedorpartof the thinkthatthat'soursolution.Forjioursec, what do you think are the most cruciai development.So we will grantsimilar March-Aprif/May-June 1997

TheAsianManaser Ss

An MBM student: How do you avoid rhe benefiBgoingonly to a certainsegEvenunderthe dual mentof the people? pricjngs)6rem whichIndiaalsofollowsin we have a largenumberof commodlties, going to a segseenthe benefitsareonly ment andothersaregoingto thefreemar' ket andhaveto payhigherprices.

Ii.'Politicaldevelopment rcformin China Youprobably alhasaheadyhappened. readyknow that all villagesin the lower communitieselect theil own managers andofficialsto run the localoffices.The idea is goingto lurther developto the countylevel,maybeevenprovinciallevels.What kind ol politicalsystemshould we have?It hasonlymanyissues.InsistIi'l thinkfirst,myansweris anyapproach ently,youmentionedaboutdemocratically system.It wasdevelis notperfect.Ifyou adoptoneapproach, electedgovernment oped or it had developed flom the you definitelywill haveproblems.The questionis whetherit is beneficial to the situtationin theWestemcountdeswhich whole processof the economicreform. can be ransferredto someof the Asian cannotavoid.That's countdes.Butwhat kind of politicalslsThisis somethingwe why we abolishthis dualpricingsystem tem is more suitablefor a countryIike at this momentwhile we think develop- China?Wearesdlllookingforit. Weare enoughmo- still tryingto find out. But definitelywe menthasalready accumulated politicalsystem, lhisdual will not copytheWestern mentum.Andthenwe abolished it is not to theChi because simply suitable pricingsystembecause it hascauseda lot of problemsincludingthe problemsyou neseculture,hisrory.and ethnicbackalsothepoliticalsystem havedescribed.CurrentlyI do not seea ground.Definitely will bereformedaccordverysignificant impactof thisprivileged will be changed, ing needs of to the thepeople.I thinkthls groupin Chinato get mostofthe benef,ts happened, thiswill condnue in the economicreform. I think mostof hasalready reformhas to happen. of the economic the benefits to thecommonpeople beendisseminated in China. AlthoughI cannotdenythis groupof peoplemaybe benefittedmore it is thanthe otherpeoplebut sometimes difficultto avoidthesekindsof problems. constantly, You haveto continuously, rules,andeducachangethe regulations, tionofthe peopleto avoidthisproblemor The only solution mitigatethe problems. forthereform,asI havesaid,youhaveno otherway to gobut throughthisprocess andmorereform.

Abdul Pandapatan, MDM'97 (Philipprnes,/.'Whatwlll now betheroleof Hong Kongwhenit retumsbackto China?

Zi: Everyone already knowsChinasigned with the BriilshGovernthe agreement mentwhichwill mainEinrheHongKong poliical systemasit hadbeenfor at least fifty years.As our late leader,Deng Xiaopingsaid,after50 years,tiere is no needto change.So,the HongKongrole wiil be asit hasbeenin the pastandwill remainthesamein thefuture.I thinkthat Sujith Kuian MBM'98 (lndia): MaIx aboutthefuturedevelopment lsmtalksaboutchangethroughcontradic- anyworries economicre- of HongKongwill be calmeddownafter tion. Chinais engineering forms.Whatdo you envisionaboutthe July lst of thisyear. politicalreformlike representadon from Professor in lau ancleconomLi Ruogo,educated Director the people,bringingthis particulareco- icsat PtincetonUfiiuercity,is ExecutilJe Chinaat theAsianDepelopment Bafik. for nomicreformpolicyto the peopleat the grassroot level?Canwe predicta change politicalsystemten or flf. to a democratic teenyearsfromnow

56

TheAsianManaget March.April 1997

l)he As[anManagerreuiaes the "TraaelNotes"sectionwhich aboutnacapturesimpressions whatsetsthem tionsandpeoples, apart,what links them to the that can be world;and lessons learnedfor managingin these countries andcultures. getsa special TheTAM reader treat in this "first" selectionof (in a regularissue, the pages seuen sectionzoillhaueonly3-4pages), are whereform and substance marleto makea gentlebutpoweraboutlapnnby a ful statement management gulu whois simultaneously an altist.

Prof. EduardoA. Morato,Ir., GastonZ. Ortigas,Sr. Professor Management, for Deuelopment andExecutiae Director ofthe AIM Center , forEntrepreneurship tooktimeout togetbackto classint'terallegedly cal photography, almosttenyearsof not touching a camera, and to write haikus, duringhisjourtankns andaerses "Zen4and". neyto Prof. Morato, " Porterian " onatmpusandauthot iconoclast ot'thelatestAIM financialmanagementsoftware,attendedthe Forumin Warton International a talkon April wherehedeliaered in Kyoto.He entrepreneurship mooedon to HiroshimaUniaerwith facsity whereheconferred ulty and studentson enterprise in Asin; then to deuelopment thePhilippineConOsaka , ztthere in his networking sulateassisted workersin lapan; with oaerseas School andfinallytoAssumption he sharededucain Mino zuhere gementexperiences. tion mana im.edu.ph> In telnet:<emornto@a

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me AsianMarwer

63

Next lssues of TAM: July-August: India

Ch,

September-October:Indonesia

orronManager's

Bookshelf section is reinaentedwith a quartetof book the latestmanagement projectsof AIM professorsin this issue. (ln a regular issue, expectonly oneof theset'our typesof selections.)

Professor Leonardo "The ConfucianTao" Silos' "Preoiew" presentsan on excerptfrom hisforthcoming book;

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ProfessorRoberto Lim's SUPR(Sourcesand Usesof " " Power) on Interaiew s' participation inaitesreader in his on-goingbookproject.

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TheAsianManaget I March-Ap.illMay-June 1997

Professor Eduardo "Competitiae Roberto's "View" " Benchmarkingon an excerptfrom his proz.tides newlypublishedbook;

TheAsian I\4anager's

The Confucian Tao By professor

Leonardo R. SIIos

ax WeberapproachedOriental tradition wiih a question: Why did not the Orientalworld .I- Y L enterupon the path of rationnlizltionthat is peculiarto theWest?tWeber,sanalysisofChinese tradition purported to show that the conditions were presentfor modern capitalismto develop in China,and yet it did n o t . 2 T hfea i l u r e w a s a t t r i b u t et odt h ea b s e n c e o icae r t a i n 'Protestant

beings, Confucianism was entirely concerned with a rationdl mdstery over this world and not merelv with adapting to the world, provided we do not undersfand by rational mastery Weber's utilitarian and instrumental mastery over nature (and men). Here lies the relevance of the Gelstesz0is senschaften distinction between the human and the natural sciencesand what Habermas was spirit called the ethic'. In the words of Talcott referring to when he said that ,,Occidental rationalitv,, Parsons, Weber was concerned ,,with the backeround of tends to limit itq horizon to the ..obiectiveworld., and its t h e o s t e n s i b l ep a r a d o \ t h a t , t h o u g h i t i s e x i e e d i n e l v t echnicalmasterv 'worldly' from many points of view, the Chinisf Instead ol askinguhy traditional Chinn faited to tnke tlle orientation provided no basis for the thoroughgoing road of ut,ilitarian rationalizatiott, perhnpswc mlght do'better utilitarian'rationalization, of everyday conducg ivh"erea! to ask why it succeededin az,oirling lf. After ;ll, despite Puritanism, with its transcendentjl orientation. did Weber's conviction of the inexorable advance of p r o v i d e o n e . W e b e r ' s s u c c i n c tf o r m u l a , , C o n f u c i a n i s m rationalization, he ended up disenchanted, for it had was a doctrine of rational adaptation /o the world; become an "iron cage". When people become Puritanism was a doctrine of rati,cnal mdstery over the disenchan-ted,thev usually try to do sometiring about it. world,' will remain a classic statement of differentiation This might well explain the paradigm shift in the between major cultural orientations.,,r management of organizations which, as we are arguing, The great merit of Weber,s approach is thatit breaks is a reclamation of the traditional attitude. Theldenif awayfrom any automatic social development that would m a s f e r y i s b e i n g r e p l n c e db a t h r i d e n o f , l e r a a r d r h i t , : be independent of the subiect,s orientition. It is a point responsihilitvnu<l accoffifany t(hniml nnslerv.

Parsons will make capital of, as we shall see. However, the 'succinct formula' is itself a classic statement of the \ n \ l r p r o i r < . ht o l i . t r l i l i o l r l l ( i h i r r : r problem wtth ihe approach which Weber himself recoe_ (551-429 to Confucius nized.r It looks for what is not there and overlooks whit B.C.)that . Thereis anapproach would make him a bore. For what solution did he offer is there except to confirm that it is not there. The interest in the Confucian ethic was to show that it was not the Protestantethic in order to support the thesis that China drd not enter upon the path ot rationalization peculiar to the West becalsethe impulse to capitalism needed some_ t h i n B l i k e t h e P r o t e s t a n te t h i c . I n s t e a d o f d e r i v i n e t h e meaning of Confucian social concepts from their'own conte\t. the approach was oriented at verifvine the absence of Puritan conceDts.

That Confucianismwas not a rational doctrine of mastery over the world suffers from a simplification t y p i c a lo f s u c h s u c c i n c ft o r m u l a s W . hichworld is the formula referring to? If it refers to the rational masterv over the physical world we call modern scienceani technology,it probably would not be contested.But if masteryover the world refersto the socialworldof human

Insteadof askingwhy traditional China failed to take the road of utilitarianrationalization,we do better to ask why it succeededin avoidingit. This might well explainthe paradigmshift in the m a n a g e m e n to f o r g a n i z a t i o n s w h i c h i s a r e c l a m a t i o no f t h e traditionalattitude.

Wh"t""" the essence of civilization is urbanizationand citizenshipfor the West,it is the transforminginfluence of the written word (wen hual tor China. of the for the ills and evils of his day?, askedthe editors "unique" or Sourcesof ChineseTradition.lt was nothing "arrestinq" but "the same solution which the philosophirsand prophetsof so many agesand cultures " ".r iraveofiered, return to virtue. Nothing could be more boring to an age that is nourished on innovation and creativitv. Still, that Confucian China lasted not a thousandyears(theaspirationof lesserempires)but some two-and-a-half thousand years should make us pause' The added suggestionthat contemporary management owes not a small lot to Confuciusshould make managers curious,at the least.6 Derk Bodde suggesteda more interesting aPProach that would link ancientChina to the linBujsticturn' of contemporary thought. Bodde made the inspired "the suqqestionthat zoP,fira, which literally means influence of the written word," aptly traln"sformins. t t h e e s s e n c eo f C h i n e s e c i v i l i z a t i o n H e captrired contrasted it with the Westernterm ciailimtion which goes back to a Latin root meaning citizen (ciois)and city ( c i r : i t a s ) .W h e r e a s t h e e s s e n c eo f c i v i l i z a t i o n i s urbanizationand citizenshipfor the one,itis the civilizing influenceof the word for the other.Bodde relateshow in China as late as the 1930's one could still seeinscribed "ResPect on public trashcansihe traditional admonition: paper" It was not aboutrecyclingpaper anJ sparewritten -the streets but about resPecting the or not polluting written word. This concernwith the written word had a "The prime placeof calligraphy far wider cultural reach. among the Chineseartsand its intimaie relaiionshiPwith Chineie painting are both well known 'There seemsto be a coniisient pattern, for example,in the fact that the Chinesewere investors of paper (first century A D ), of block printing (ninth century or earlier),and of movable type (eleventhcentury).Or that prior to around 1750,they are said to have produced more printed books than the rest of the world Put together"3 "invalidate" the suggestion' Bodde's editors would " Boddehad simply erted"for u'enhu, wasnot an ancient Chineseterm bui probably borrowed from a nineteenthcentury Japaneseterm which in turn might have been the result of the influenceof Westernideas.'Be that as it may, Bodde did not say that u'enhun was an ancient C h i n e s et e r m ; n o r d i d i t h a v e t o b e a n c i e n tf o r h i s to stand.lt was not about how ancientwere susp,estion thJierms,for neitheris ciuilizalionagainstwh ich ruenftla is contrastedan ancientEnglish term' It was rather about how well thetermse\pressedwhat wasimportantto the

Chineseand what was imPortant to the West And what wenhua namedwasindisputably important to the Chinese from very ancient times, someihing the same critics admitted. "invalidate" the use of a term to describe We don't ancientideasand realitiessimply becauseit is borrowed or recent.The EnSlishterm clllare is said to be of rnodern coinagebut it would be absurd to invalidate the claim the that cirlture was imPortant -Edwardto ancientsocietiesbecotsr coined Tylor, who probably term was modern. the term in its anthropologicalmeaning,usedii to describe "the condition of knowledge, religion, art, custom, and "the civilization of lower tribes the like" with an eye on as related to the civilization of the higher nations,"r0that culture is is to say, of Primitive cultures. The notion of 'Chou "Confuciussaid: had centralio the Confucianethic. the advantageof surveying the two Precedingdynasties' , 3:14)' How rich is its culture! I follow Chou"' (Annlects Who would invalidateLegge'stranslationon theBrounds that culture is a recentterm, esPeciallyif we considerthat the 'lineuistic' culture of Confucian China is intimately relatedio its philosoPhY?1r ( l l r i r r c s el ) r ' l t t rl l t o l o g i z r r t i o r t From our previous analysis, it has been shown that mvth is a confusion and a reduction. It is a confusion becauseit mixes up nature and culture; it is a reduction becauseit is anthropomorphic,reducingnatureto culture' Myth also has the propensity to objectifyWe must-now out in relief an impoitant feature of ihis objeciifying it attit,]de oI the myth: it is not any less inter.subiectire'For ano transforms obfecfsinto a community ot consclous communicating sl.rbjects.Itrs a reification noi by dealing with abstractionsas if they were things but by dealing with things as if they were conscious bein-gs It is not necessarilyin the senseoi turnlng a versonification, things oi ideas into individual gods and demons,but in t h e m o r e q e n e r a l s e n s eo f e n d o w i n g n a t u r e w i t h with the Power to communicatewith men consciousnJss, That is the.significanceof its anthroPomorphism The mvth makes the universe intelligible by making it iniellieenUit tums physicaleventsinto psychiceventsand into the efiicacyof the ritual. the symbol' the .urrrut"ion thus ihat in the word. Magic " w oisr lrite d made efficacious lt is p h y s i c a la n d b i o l o g i c a le v e n t sb l e n d mvthical and moralevents lt is thusthat with IinP,uistic seamlesslv the mvth confusesiature and culture Demythologization could fork, depending on the ruling interest,in the direction ofnature or of culture This bifuriation is not a mere possibility but is factually encounteredin the history of thought The Greeks and the Chinesedemythologizedtheir worldviews alongthese two diverqent lines. Both lines are found in Greek and Chinesetiought but eachhad iis dominant interest The Greekshad a bias for the natural and their very idea of

Vlfhat Confucius said was less

about science reflected it. The Greek Way was to be versed , in nature than about society. Ghinese ,,To the ways of nature. be versed ln the ways of nature tradition anthropocentric, meansthat a man has observed outside facts and reasoned ma-n-centered, people-centered, tong about them."'2 before these terms became popular in Greek science(eplsteme)was about cettainty and theory wa: the coltenplation of necessaryuniversal,-permaneni, managementtheory. and eternal ideas. It followed th;t what was'theorefici was not historical or practical. For the theoretical was about the changelessbut the historical or practical was l . u h t ' r r r r . r i z i r tiorr about the changing and changeable.fheir view of Chinese philosophy is said to consistof three mapr nlstorrcal change itself partook of this permanence. .

In contrast to the Hebraic, the Greek concepl of history was strands, two of which are ancient and native, cyclical, a continuous recurence, not a linear movement Confucianism and Taoism, and one foreign and recent in with a beginning and an end. It was a naturalist comparison, Buddhism. But studen-ls of Chinese civilization are generally agreed that insofar as there was perspective that would eventually lead to the modern achievements of science and technology, but not before a merger, the surviving paradigm, to use a metaphor firm corporate mergers, was Confucian. The metaphtsical and the idea of theory underwent a shift. Tiiat technology is mystical elementsof Taoismand Buddhism were aligned applied theory is not a Greek but a modem idea. Tihe expression empiricalsciencewoluld.have struck the Greek with the core tradition. Although their integration"mav been completely suicessful anisee.sawin! like..a sou.ndingbrass. One called that history 19y3r |ave 9a.r rntormation. What correspondsto our notion of scienie oatflesfor suprqnacy were recurrent, it was Confucianisri that finally triumphed. It rnay even be said that the they would have understoodat bestas the knowledee on cosmological elements werâ&#x201A;Ź more easily integrated into the basis of which an act of making or proarr.ii! is thetradition becausethey were made to'r"ppJrt it ."iui possible; they call ed it poetikeepistemeor teihne.,,13 The demythologization processinChina, on the other system. . hand, torked in the direction of culture. Confucian . Just as Fung Yu-lan divided Chinese philosophy into -as primarily a proiect of humanizing two periods, so Derk Bodde distinguisired two slts of 1i,]gTti::lbl, soclery. tt ls the common assessmentof students o] Chinese myths, those that belonged tJ classicalChina anj Chinese tradition that its core doctrine over thosethat cameafter.1o_The myths of the former period were few while thoseof the latter period were numerous two thousand years until the tum of the twentieth centurv hT Confucian. It is also generally recognizedtha't and of diverse origins. They were Taoist,Buddhist, loJ fTn "than crlrt gods; they were portrayed in art, in religious what Confucius said was less about nature about society. Chinese tradition was anthropocentric, man- llte-rature, in works of fiction; they had more clearly centered,people-centered,long before theseterrns became defined anthropomorphic traits and were orderel popurarln managementtheory Thecosmologicalcontent, tuerarcNcally closely paralleling the imperial bureaucracy. by c:Tparisor-r, thefewer gods of classicalChina appeared often assumed as characteristic of the ,iraditional,, rarely in-arl their description was so vague or brief their (as orientation in the analysisof Riggs),while not absent, personality and even sex remained uncertain; gods and ooes not torm the core of the Confucian tradition. demi-gods were stripped of their supernatural-qualities FungYu{an divides the history of Chinesephilosoohv into two parts, the period of the formation ofihe classics add transformed into men by the proiess of "euhemerization"'7 (down to_220 B.C) and the period of by which myths were iurned into transmitting the classtcs(down to modern times).'aThe period from i-bout hrstorical.events, following the belief that myths and 221 B.C.---thedate usually given for ihe end of feudal l e g e n d s h a d t h e i r o r i g i n i n h i s t o r i c a l e v e n t s a n d Lnrna and the beginning of the empire__down to the beings.'Chinesescholarshave never known more than Degtnnrnt ot the twentieth century Chinesephilosoohv one way of interpreting legendary accounts, accounts, that that of ol is classifiedas "classicallearning,;,a perioa of nana'inl euhemerization.Under the plea of recoveringfrom such down the classics.Even when it wai ruled bv foreiefi accounts their historical kernel, they eliminate those invaders,by-their4ongols(the yuan dynasty, tZZS_tSiel elements of the marvelous whicir seem to them and by the Manchus (the Ch'ing dyn uity, tU+ntZ), tn" improbable, and preserve only a colorless residue, in classicsremained the intellectual foundation of Chinese which gods and heroes are transformed into sage civilization, conqueringits own conquerors.Fung yu_lan emperorsand sageministers, and monsters into rebellioirs observed.thatChina's history ofphilosophy couli not be princes or evil ministers.,,r8 drvlcled rnto ancient, medieval, and modern, in the _ Thisprocessbegansoearlyit prâ&#x201A;Źventedancimt mvths manner.Westernphilosophy is traditionally divided, trom being-recordedin their oAginal form, a ,,situa'tion pernapswelt-rughunique amongthe maior civilizations becauseit did not have a ,,moilern,,period.15 'by , t " i l

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of antiquity" and, of iourse, relretted

stuaentsof

" m v t h o l o q v . I t a l s o e r p l a i n st h e f r d g m e n t e ds t a t eo f u i . i " n t i i l i n " t " m y t h s i n p r e - H a nl i t e r a t u r eA m v t h usuallv has to be reconstructed,if it can be at all, from recorded in its different sources,for it is seldom found "so that scholarsask entiretv in a single literary work at themselveswhether ancient China had a mythology "20 all in the senseof an integratedbody of myths Very earlv in Chinele history we find officially appointed historians and librarians whose duty was to oieservewhat had been handed down and to commit to ivriting the important eventsof the times The father and Chien son teim, Ssu-maTan (died 110B C') and Ssu-ma 'Grand ( 1 4 5 - 9 0B . C . ) ,w e r e s u c c e s s i v e l ya p p o i n t e d -220A D ) r' Historians'during the Han dynasiy (202B C No other civilization as the Chinese, it is said, has as comDletea record of its history spanning its beginnings down to present times. The historical method may not have been sufficiently critical when measured against modern standards.Scholarsoften find it difficult to establishthe time of eventsand the authorshipof works' But the historical-mindednesswas evident in the fact thai ancientChinasoughtlegiiimation ofits socialand Political institutions in historical rather than on cosmic events' Euhemerization itself reflects a bias for the historical' f l u e n c eo f t h e S i q n i f i c a n t l yi,t w a s t h e p e r v a d i n" rgei n s P o h s i b i l i t yf o r t h e w h o a s s u m e d CJnfucianists conservingand editing the ancienttextswhich eventually 22 becamethe Chineseclassics."

This bias for hisiory was merely the other side of anothertrait of Confucian tradition, its stronglyhumanst c h a r a c t e r ,w h i c h i t s e l f m a y e x p l a i n i t s h i s t o r i c a l m i n d e d n e s s .l t p r o v i d e d t h e i m p u l s e t o e s t a b l i s h p . e n e a l o g i easn d t o c o n v e r ts u p e r n a t u r asl t o r i e si n t o ii.rmanevents.Although this trend may also havebeen encouragedby the desiieof the noblehousesto tracetheir genealogies to legendarvfiguresand times,still lhatthey i o u s h t G e i t i m a t i o ni n l h e h i s l o r i c aal n d h u m a ne r e n t s rath"erthin in the suPernaruraland cosmologicalorder was itself a reflectionof its humanist bias Where cosmrc influence is undeniable,classicalConfucianismhad less interestin a cosmologyin and for itself than in its relation than to human affairs.lts main concernwas peoPlerather'Love "Fan Chi askedabout jen. The Master said, nature. the people.' The disciple then asked about knowledge' 'Know the the Master said, People"' (Analects,72:22)'

l.||(l|l(to.l

byTalcott translated 1lvaxWebetIie Protesta ofCapitaltsm, nt Ethbandke Spint p 25' Intrcduction' (New Sons)' Scribne/s Parsons Yoi(:Chades by andediled bandaled ? Seetheconcluding ofchina, TheRe/Eion Weber, ofl\y'ax chapter pp 228249 1951)' Company, l!'lacmillan (NewYorkrThe Hans H.Gedh 3lheoriesofSociety.FoundationsalModensocio/ogicallheory,editedbyTalcott JesseR Pitts(NewYo :TheFree D Naegele, Kaspar Shils, Edward Parsons, lromthe istaken ffomWeber p 1055Thequolation PressofGlencoe,Inc.,1961) p 248 China' of Religion ofWebelsThe chaoter concludinq 'Hence studies lhese i s..Wri.it tnttoou.tion â&#x201A;Źlhic,pp 27-28: inlheProteslant In b ef ofcultutes,however 0n thecontrary' donotclaimtobecompeteanalyses from which itdlfferc in the elements emphasize quile deliberately they everyculture which to theproblems oaented delinitely fney are,hence, civitizatlon.

Wesiern With viewpoint this lrom culture Weslern of underslanding fortne seemmportant Blt to avoid didnotseempossible ourobiectin view,anyotherprocedure ot our on thelimitalion emphasis we mustherelayspecial msunderstanding purpose. deBaryWing{sit i iorrcesof Chinese byWm Theodore compiled lradition, andStudies: Sources af Civitization' WatsonSeriesiRecards Chan,Burton 55 volume Bary' de Theodote bywm edited Civilizarons, on ta Oriental tntroduc 1960)p 18 Press dnlversity u'nbla Yo'k: Co {Ne!/ l\'1a nagemenl ) Ihe " SeeLeonardo )Sad {aoout IRealry R.S'losWhalCorfucius pp 30-36 1992), 5, n.2, Manager(vol.

Asian 'lntroduction CivilEalton ' i DerkBodde-, ofChina '"inEssaysonChtnese totheHistory (Princeton' New Borei Dorothy and Blanc Le by Chatles editedandintroduced P'esso 181)p 39 Univers'ty Je'sevPrncelor p 39 s Bodde.'lntroduction ofChina.InEssays. lotheHistory p 3' Essays, , Seetheedltors' Bodde, oftheessaysln reassessment (New Yo*:Harpet r0 EdwadB.Tyior, Culturc I ol Pimiwe Parl ofcultue' Iie Or,gins 1958) Torchbooks, a (Culture BookCo' nodate); " SeelheFourbooks, Legge byJames translated (Taiwan: The in 1980 edition a 2nd published in 1979, was transation revised philosophy Westem 1980)Contemporary Renaissance, cultu;al ncilofChinese Cou Tationalistic' the earlier thoughtthan to Chinese access provide better a to seems t0apprecrate northeinclinalion tohandle tools didnothavethe which ohilosophbs ' components generalpn new ls a There of conduct non logica and ihenonrational' onltsown-terms thought Chinese oi schoarswhoaretryingio undetstand -Su-ch C Hall'Philip David A.CGraharn, Fingarette Herbert asqogerT.Ames, authors In orderandwnting a few(inalphabetical io mention T;Wei-ming, J lvanhoe, 'snotto saythalthey which qene'atlon of'nlerprelers rew lot']is Enolshlbelonq or or aooullneirnol'o4s e heraooutlne'nlerprelaton ,g;a -ong in"rntatu"' philosophy. i Hanllor.TheGreek WaY' P 22 G byFrederick ,3Hans-ceora in t|r-Ageof kience'translated ie ason cadame( p' 5 1983)' Press, The MIT l\,4assachusetts: (C;mbridge.

Lawrence (Princâ&#x201A;Źton: byDe* Bodde " FungYu-lan, translated Philosophy, ofchinese AHrsiory 2,1953),1:15:"TheendoI 1,1952;vol vol Piess,2volumet, University PincJton China' in221BC , whenCh'inunilied tookplace States;eod,which theWarring pe ol Chlnese od the ancient of the close marking as also iegarded is usually philosophy.

'5Funo.

2:1-3 PhrlosoPhy, Chrnese on DerkBodde is baseo " The-characlenzat,on m}(l'slnat'ollcws of Chinese ''f,lyths tneendoflhe pp Yu-lan dated Fung 45-84 ir Essays ofArcerlChrna. theCh'in unoer wasunited i1221B C wlenChrna ctissicelperodoiphrlosophy "ciasslcal" period of the to include m)'ths period ofChinese the Bodde considered p 45) 220(Essays, ended which theHandynasiy ;lr,4yths pp 4546' ,7Bodde, inEssays' china," oiAncient 'Legendes 'sHenri dansle Chouking"Jaunalasialtque mythologiques l,Ias;ero, "['l]thsofAncient pp 4849 Essays' China'''in quoted p.204, byBodde, (1924), '' Bodde,[,'lyths p 79 inEssays, China," ofAncient 'l\,4yths pp.45-46 ,NBodde, China,inEssays, ofAncient fromihe translated " SeeSsu-ma of Chlna' rdsof theGrcndHistoian Reco Ch'ien of Civilzalion' Records Seies: 2volumes, Watson, Ch'bnbyBurton ShihchiofSsu'ma 1961)1i3 Unversity, vol65(Columbia andSludies, Sources p 51 '?Bodde,[y'vths inEssays, China," ofAncient

Competitive Benehnrarking Researchand Marketing Mix Decisions n y c u r r e r t l yp r o f i t a b l e c o m p a n yw i l l d i s p l a ya p r o d u c t p c r r t f o l i os h o w i n g t h e c i l t i c a l rmportanceof its line of successfulexisting

prLducts.lhsss ploduct. play a leading role in sustainin! f n e c o m p , t n v ' se r r t i r cc u r r e n t o p e r a t i o n . a n d i n t e r n a l l i finarrcing itrrcw and grorr th pioducts. Ho*"u"r, ih"," e \ l s n n g p r o d u c t \ l h c m s e l r c sn e e d s u p p o r t t o continue to be ruccerslul d1d profit,rble. support is market and competitive . .On" f"t i n f o r m a . t i o n -O n a c o n t i n u i n g b a s i s ,c o m p . r n i e > murl K n o \ \ w h d l t h e ( o m p e t i t o r s , l r ed o i n g , h o w e f l c c t i v et h e i r own marketing efforts are, ancl how these efforts are . r f f e c t i n ga n d . r r e b e i n g a f f e c t e db v c o m p e t i t o r s .

This Kno\^tedge rs h h,rt ou-rad.tpted version of competiti\ e Dencttm.l rkltg re5e,lrchpro\ ide\.

The Underlying Concept

The concept of ,,competitive benchmarking,, did not , { a r t i n , m . t r l e t j n B .l t b e g a n a n d > t i l l r e m a i n i r \ one of r n e r l u J t r t v r m p r o \ e n r e n tt e c h n i q u e si n t h e 1eM rTotal Quality Management) movement. As a process, benchmarking \t,rrr5 by idenrifying rhe ': 'l tl nr er f\:tt i t i v e c o m p , r n y i r r a b u . , r n e s s a ct i r i t y w " h e r e benchnrarling w,rnts producli\ rty to rmprove. Then the n c n c l t m , r r k l n Ac o m p , t n y c ( n l t a c t st h e i d e n t i f i e d . . b e s t , . company and proposes to study its practices. lf the target companv approves/ the benchmarking study procee"ds to gather data to answer these th."" buri. q.,"siior.,s, (1) Why is this company the best in this business activity?

(2) What can n'e do at our end to match this best' company?

(3) After matching, u,hat can we do to then excel in

ir?

This original benchmarkingprocessis nol feasible to . lmplement.in marketing.For erample, no marketing k n o u ' n f o r _ i t s s u p e r i o r a c l v e r t i s i n ga n j :nt"p1ly promotron practiceswill open its doors to an inteiested competrtorand allon,it to studv thosepractices.But the 'u kev concept of being able to knor,rjexu.tty -nof s u c c e s s f tcr lo m p e t i t o ri . d o i n g b e t t e rr e m a i n s as thc process'fundamentalprinciple.

By professor E.luaKIo L. Robefto This baric principle wa, what competitivc , benchmdrking recearchin marleting pursued tiiobertu, ). The practical. question wa> a ma tter of ho\,\ to g,rin t,1,992 h e r n l o r m a t i o n .H o n . e l s e c a n m a r k e t i n g k n o * r,ihat leading com_petitorsare doing betterl Th,rt is. hon. eise a q r d et r o m t h e o r i g i n a l b e n c h m a r k i n g , rd i r e c t dpproach whichrnarketing cannot employ? Th"!.,"rt to. ui i.,"*". started with the obvious: one must first know in what specific marketing practice or practices the leaclinq competitor. must be doing better. Having this unclerstanding is critical to knowing what efiective marketing mix strategies to take igainst a target competitor.

What research can gain for marketing executives such a n u n d e r r t a n d i n g l l t i . a r e s e a r c ht h . t t p r o c e e d s .rlong the following basic premises. To start with, evervthing that marketing executives and their competitors do tX generate sales comes directly from either the buvine c o n s u m e r c o r t h e t r a d e r e t a i l e r s .T h e r e t o r e , d a t i on competitive activities as well as the benchmarkins companv's reside in the nemorltr of the buving consumer-s and-the reselling trade retailers. To gain an understanding of these comparative marketing mix activities, researcir m u s t d r d w o u t t h e d n t . t f r r r m l h 0 s em e n r o r i e s .

Cumul,a.tive erperience with (ompetitivc , b e n c h m a r l \ i n R r e 5 e a r c ho n p h a r r n a c e u t i c a lp r o d u c t _ rhow\ th,,rtthe precedinA lr4sic p1â&#x201A;Ź,m1sss are correct. ln dodltron, such rescarchprojects ha\'e yielded othcr D e n e r r tas n c la d ! a n t a g e sl i k e t h e f o l l u r n . i n g : 1. They have been most provocative in challenging obsoletemanagerial markerrng assumptlons.

c.

Flipcharts,films, and other audiovisuals Clinical study rePrints

5. Detailing suPPort to prescriPtions 2. They have served as real and humbling eyeopeners to marketing executives who have uniustifi ablY grown comPlacent' 3. They have been most motivating in getting phaimaceutical companies to adoPt timely "h"tte"t in their marketing planning and implelmentation.

a. b.

directly

trigger

"PrescriPtion Special campaigns like contracting" Incentiveslike travel awards,contests,and so on

ln practice, the actual makeup of ihe ethical promotion mix will differ but will always include what the industry "necessaryindispensable" elements These reqards as ellments are detailing, Product samPling, Product literature, gifts or give-aways, and entertainment ancl l-essons from .{PPlicalions representation(alsocalled doctor PR) Other inputs may in Phannaceulical llarketing defines what these into be added. Each particular situation Pharmaceuticalmarketing classifiesits Products "desirable"add-ons will be. "ethical products" and "advertised products " Ethical detailing is the Pivotal ethical seen, be can As oroducti are marketed to the doctors who, in turn' promotion variable around which ihe others revolve; prescribeto the end users' Advertised Products are evervthine else supports it. Notice also how in marketed to end users wiihout the need for a doctor's pharmaceuiicalmarkiting, the ethical Promotion media prescription or recommendation ComPetitive "detailman" or the is a direct personalmedia. This is the marketing pharmaceutical in tenchmarking research medical service rePresentative.The pharma-ceutical refersto ethical products marketing industry differentiatls betweendetailing and selling'and For competiiive benchmarketing research,ethical riehtfuilv betweendetailmenand salesmenDetailing oharmaceuticalmarketing is ideal asa pilot areabecause taigets the doctors for the prescription response;selling it offers a highly simplified setting.All or practically all goJsafter the trade or drugstoresfor product placement' marketing mix elements are geared toward the doctors' ihe detailmendo the detailing; the salesmen,the selling' This eivei a singular focus to the researcheffort' The data-gathering objective of comPetitive In"ethical p-harmaceuticalmarketing, the major defines a two-steP Process' in what the benchmarking research marketing mix elementsare concentrated "ethical promotion The Basicallya stimulus Presentation,the first steP,Presents pharmace"uticalindustry calls to the ioctors the ethical Promotion mix elementsthat ethicalpromotion mix typically consistsof the following participatingbrandsin a given pmduct categorycurrently marketing inPuts: ,rr". Th".t, i-nthe secondstep, the doctors' resPonsesto the stimulus are obtained. It asks the doctors which 1. Prescriptioneducatorand persuader:detailing existing brand in the market they consider as doing the 2. Point-of-prescriPtiondetailingsuPPorts most or the best in eachelement' How do the results from this simple processtrigger a , Produci samPling the kind of research-userexcitement and motivation b . Product literature and Posters mentioned earlier?We start answering this question by c . Gifts or giveaways first discussingsample researchresults' Then we revisit PrescriptionPads the processfoiobtaining theseresearchresults' Our specific sampleiesearch results are about three 3. Goodwill-buildingdetailingsupports leadine, competing brands of an ethical PrescriPtion a. SponsorshiP to medical symPosia or oroduc"icateqory'The researih gathereddata from two (GP)sample' conferences lamples of d'octb.s,a SeneralPractitioner joumal ads b. Medical and a specialistsample. Table 15-1 summarizes the c. Researchgrants and scholarshipawards obtained data results. d. EntertainmentandrePresentation The specifiedresearchsought to answerthe question: "Which ethical promotion tool or tools were resPonsible 4. DetailingpresentationsuPPorts for the market leaderbrand's and the challengerbrand's letters p r e s c r i p t i o n p e r f o r m a n c e s ? "T h e r e s e a r c hr e s u l t s a. Product announcement kit in tabte t 5-t first defined in its first row of b. Detailing manualor l,r--u.ir"d T t

.ril$rrrefl-.'#ffim statistics the three brands, performance outputs.

These are thc brand's prescription shares.l-he prescription share r n e a s u r ct o r a h r a n d i r t h e , , , o f J o c t o r s i n t e n i e r r t e l saying that the brand is their most prescribedbrand., The share obtained identified Brand AA as a strong market leader particularly in the spccialist segment. tt urru,u. rmpresstveachleyement becauseBrand AA attained the I t . r J e r s h i p( o n r p c t i t i v e , t . t t u \ t w o \ r . . l r \. tt t r . r it_ lndrlet l a u n c l t . I h c . u , c e c d i n gr t , r r . .i r r T . r h l r | 5 _I r n e a s u r e J fhe n r d n d \ p e r l o r n t a n c ci n p u t s o r t h e i r c o m p . t r a t i v c ethicdl promotion efforts. Seven performance inputs or ethical p r o m r rm i r e l e m e r r t sr v c r em e . r , u r e J :d c t i i l i n g , prrrrJuil sampling, give-an ays, scientific meeting sponsorship, m e d i c . r ll o u r n a l a d \ e r t r s i n g . . nd lrudu.t litc;.ttured \pecr,rllr,r\el nw.trds The \tati:tic_ crn these inouts ansn'ered the researchobjective,squestion. Thc research report's analysis follon s. ln the CP market, market ieader Brand AA distinguished itself from the other two brands bv what it d i d . m o r e i n t h e c t h j c a l p r ( ) m ( ) t i o nc l e m c n t so t d e t . r i l i n g and product samplinâ&#x201A;Źi.hr the restof the ethicalpromotioi mix elements, it simply matched one or ioth ir.r,o competing brands.

The situation in the specialist markct is different. .

At lirst glance, the Table l5-1 staiisticsseem to rndrcate hoh,

Brand AA "successfullv,, went even further into focusing.

I t e s t . r b l i ' h e ds-u p e r i o r i t yo n l y i n o n e e t h i c , r jp . n m o t i o l n e l e m e n t ,p r o d u c ts a m p l i n g .A n d y e t , i t \ \ . d sa n e v e n more dominant market leader than in the Gp segment.

It pdy\ to lool dt the:.ituation in the specialistsegment a_sTable 15-1 portravs it from a more dynimic standpoint.

C)nelvav of doir.rgthis is to think ab(,.,t ,nhot .orrlj har," preceded the Table 15-1 situation, and what could most likely come after The cluc to \.vh.ltcould have been the precedent situation comes from what lvas happening in the GP segment. Perhaps Brand aA hacl supcrioritl,iot onl)' in. product sampling but also in dctaiiing. It must havc also succeeded in the Gp segment bv matching competition in the rest of the ethical promoti,on inputs.

H o w e r e r ., r sT a b l eI 5 - l r h o w s , t h q i c z r e n o l o n q e r tnre n o h . , C ^ u m p c t i . t i o ne.s p ( c i . r l l v l h c n u m h e r t r r . o br,rnd.

D r J n d b t J ,t t . r l lc h , t n t e d i t . F i r \ t o i a l l , i l h a t l m,rtchcd market leader Brand AA on detailing. As a muitinational, however, Brand BB knorvs it cannot clo this on product

,jl ,,Ti erhicatpromotirrn :uperiorirvor :1T,llil, o u I a \ t , l D l e l 5 - t 5 u g p , c \ t \B , r . r n dB B i s r i g h t

i n t h i n l i r r g t h n l c d n p r o b a h l v m r , r r .t h , t r rc o m p e n s a t e .it l o r t h i \ c o m p e t i t i v ed i , a d r ' . r n t . r gbey , r . e l i n g s u p s 1 j o 1 i 1 1 in other ethical promotion miielements that matter tir the specialist MDs. And Brand BB preciselv did son.rething

Competilive Benchmarking Ratiosfor ThreeLeading Brands in TwoMDSegments of GpsandSpecialisti (Base= Total100Gpsand.100 Speciatists l\.40s nterviewed)

Benchmarking Indicators "/osaying brand ls lheirmost

%mtingh.andasdoinghe mostdetailing

38

ZJ

15

m

I

%saying branddidthemostproduci sampling

16

8

37

22

11

%saying brandgavethemostgiveaways

28

29

46

51

co

JI

4:l

47

59

71

co

JI

70

89

85 86

%saying brandsponsored themostMDstomedconvenlions 45 %saying fiey attended conventiondsympsa %saying brand's medjoumaladwasadtheylastsaw

77

79

71

78

92

%saying lastadvertisement seenas"impressivE,

9l

94

9!)

88

90

%saylng producl liteefurctiey lastresdwasS s brand,s

86

86

n

TZ

78

80

%saying SEyitundlastreadprcdudlitoratuE as.usaful.

98

99

AA

oo

:,o

99

%saying fEyrui!â&#x201A;Źd fun bmrxt olkbra spet*d had a^ad

1

0

I

10

11

Two-step Process of tho data{athering obiective of CompetitiveEenchmarking Research. st, Presentinga Stimulus nd, Obtainingreeponscsto tho stimulus "sPonsorship ot about this. lt l orke'c1for superioritv in doctors to medical scientiiic conventions and svmPosia" "rredic.ll journal ads " Thesc arc trvo ethical ancl ir promotior.t irrputs thal Brand BB is probabll' right-in interpreting ai thirrgs that count a lot to specirlist MDs' Tir,: f,,cits orr the specialist is a stratellicallv corrcct ollc bec.luscwhat.l pharmaccuticalcompanv successfullv elocs itr tirc sp.'ciaiist segmenis spills over to ihe -CP olten sr.gnlr'nt. lt is knol'n that thc ClPs look up ancl specialists' the of toiiou the latest prc'scriptionpractice's Tlre r.n.rrketingirirplication for market leadcr Br'rrrd AA is clear.lf it t'ants to Pre'\'enteventual m;rrket leadership Ioss irr the specialistiegr.nent,Brand AA rnust neutralizr' had c h a l l c n g e ' rB r a n c l B B i r r a r e a s n ' h e r e B r a n d B B succeededin establishing superiorit\"' lf rve h.rcl ihe compeiitive bcuchmarking data of six or or three mulths ilgo, \\'e c(il-lcheck the correctness bclorâ&#x201A;Ź' incorrectnessof our assumptionabout the situatior thc'Tal.rle15 1 scenaritl.Thc'n rvt'can sec u'hat is reallv happt'ning atrcl rvhat is most likelv to happcn -Tl.tis p'1vs to have , -, . ir" , , . , t i . '. t h e i d e a t h . r t t ' h i l t ' i t ( , , r n t r ( ' l i t i \ eI ' e t r l. t t r r , t r L t n JS,.l t J , i t P ' t v ' e v t ' n n l L l ( l t lt r r ' - , . r r c l r. , , n . l u c t , r i p e r i L , , . l r c . l lhl r. r s- e r I r ' l l b l n e f i t t providt's trcrrtldata that l ill enablemarketing exccutr\'r's to se't'n'hatrclati\'e ch;lttgcsin competitivc'strategiesare' of takirrg pl;rce.Thesc same trcnd clataenable prediction thev turthe:ranci likely future changes Most imPortantlv help marketing executives take Preventive and colrective narketing mix actions The rcsearch reaffirms some of our basic marketing mix strategv PrinciPles: L

.l

In orclerto gain market shareor even becomethe m.rrket leader,it is not necessarYto be suPerior over others in all the marketing mix elements' Being superior in a selecled strategic fe$' lvhere conlPetitorsare at a conPetitive disadvantageis thc kev.

2. Wlrile jt is not necessaryfor a market leaderto be superior in all the marketing mix elements' lt cantlotneglectits Positionin thoseinputs wtere lt is not suPeior. Ttr sustain its cirosensuPeriorlty points, ii must rratch comPetitorsin those other 1l1Pllts.

3. Tn o beha\'iorallv distinct market seglllentsrerluire t1\'o cliffcrent marketing mix strategies to allorv a

i

A

I'

b r a n c l t o e f i e ' c t i Y c l vf a r t i c i P , r i e i n i h e r n [ J u t bet$'eentlre t\\'o, the conpetitivelv aclrt1r1tagcorts primarv targetsegnentis thc ()ncth'rth'rsLhesalestriggcrinc ittfluenceotr tile olher'

How the Sample Competitive Benchmarking

ResultsWere Obtained

We'nrtr{ take.r step back to see \\fiat rescarchdesign lts rvas able to proclucc thc ctlr.nPetitivcbt'nchmarking re'su as serves thc in unctlver rve What Process in Tablc I 5- L preparatiorl for our aclaptine th'.rt clr'sign to the' compe'titive bcnchllrarking rcsearch of cottsttntcr products. ' T h L '- , r n r p l t u , m [ ' e l i t i \ ( h t n , l r m . r r k i t r gr \ ' ' ( l r ( l \ r \ ( rvas dcsigneclas "lnv rL'guL'lrsurvev have just cliscttssc'd \\'cre The su6 ev resp()nLlents docklrs. in tcrrlic'*' stuclv of cloctors' target thc of s.rtlple a representatiie rautlottt Sanipling rvas from a comprehcusive' r'erifiecl' and u n , l . i t c rl li . t o r - u \ l r . l t \ t ( r r : \ J l n f l c - r / ' r r ' l ' l r f i c ' t l l r ' l lt , r r i l i n t u n tr l u ( ' t .,l , f l i l { l q t r a l i r Ji , r ( \ l \ ' r l t l e n ( '-l ' r ' t " r a c c c p t a b l e ' e l a ta a n a s s u n r e ' c l t h . r t rvas a sample size error an rtrtl lt'r'el 9 confidence 5? accuracvboundeclbr' .l margir of t l0'i ttnie'r maximutl tlata vari'rbilit',r i Tie cluestionnairc itc'ms for gcner'rting srtch rcsults as thttsc shorvn in Tablc 15-1 n'c're sinll.rle'convcnie'nt' ancl casy-to ans$'cr questions.TheV u'cre closetl encletl' the multiplc choicc'.1.,.'rii,,t.tr.Tcranst c't thcm, all that ( i't l r ' t l l ' l l t I ' n I I l L I ! \ , r Ii. r c s n , , n . l . ' Jn ot r t , , rl r . r Jl , ' J , ' r lr( t ' n J c d r \ ' \ t r t t ' l t . r t r n u l l r ' Ir t , I r c - p t t n \ c ' T t r t 't l o t e d flcl \\rere: I Brand AA Doctor, in Your last 1 Brarrd BB prescription of this 3 CC Brancl medicil PrcParation, (sPecttv) Othersr you did brand r'r'hat ( ) prescribe?

Mav I nou' talk to you about vour impressions ol thc ethical promotions efforts and activities of thL'sethree' brands. 'tl,slr tlts tl tltl IInterviewer: I{rc:ono nrslorol-xt'i

l.

BFIO\r ' rORIlACII QUFsllO\' USIIIl {f !iL5ro\SF SHEFT i\NS\\'ER

SttOIVC,rnO.l 2. Which brand did the most number of dciailing? proclttct 3. Which brand n'ould vou sav did the most

sampling?

4 . Whiih one had the most givca\'vavs?

5. Whicir brand sponsored the most doctors to

meclicalscientifii conventions and symposia?

6 . Did vou vourself attend one of thesc conlentions or svmposia?

7 . Which one had an ad that vou last sarvin a medic'rl 'iournal?

Would vou r.rtc the' ad thilt vou l.rst san as 8. "impresiive"?

9 . Which brand had a product literature that you last read?

1 0 . Did_V.oufind the product literature you last read useful?

11. From which brand did you receive an offer for a special travel award?

This kind of questionnaire makes data gathering easy and quick to accomplish. Its pre_test and actuJl use showed that it took iust five to ten minutes to complete it.

It was a questionnaire that substantially shortened the field-interview time. Remember that fieidwork takes up 50'; te oO,; o[ toial survey cumpletiontime. Anything benchmarking indicators should reflect the prevailing t h a t f . r c i l i t d t eds n i n t e r v i e wl i k e u s i n g a n " a r y _ t o _ a n s w e i marketing mix tools actually and currently in use. The multiple-choice questionnaire,shortens the time required second considerationis that those indicatois should also to{omplete the entire survev. Additionally, it is very co\t mirror what research users consider the currentlv maior ertecflve. infl uencing fat tors oI a brand's market share performance.

The questionnaire also made room for flexibility both As to data analysis, our case example shows how in the kincl and number of ethical promo tools that the s i m p l e a n d s t r , r i g h i f o r w , r r di t i s . T h e J , r t a , r r e s i m p l e research users wanted to include. The flexibilitv also percent frequcncy disfribution o[ response,.Then, tor a a d m i t t e d i n c l u s i o ni n t h e s t u d v o f o t h e r m a r k e t i n gm i r g i v e n b e n c h m a r k i n g i n d i c a t o r , t h e i e p e r . e n t a g e sa r e "mix. elements outside of the ethical promotion compared to come out with the kind ofconclusions drawn Pharmaceutical marketing executives who have made in our illustrative sample data analysis. We must competitive benchmarking research a part of their e m p h a s i z ea g r i n I h a t t h e c o m p a r i s o n s h o u l d a l s o b e research program.have expanded the benchmarking temporal. Much more can be learned if the current indicators to include items like: benchmarking data are compared to at least a previous " D o i n g 1. the most persuasive detailing,, to set. As we said, it is this trending that wili enable accommodate the idea that it is not only quantity m a r k e t i r r ge \ e c u t i v e s t c r f u l l y u n d e i . t a n d t h e c h a n g e s but also quality of detailing that maiters in taking place and to anticipate ihe likely direction of future generahng prescriptions c han;1e>.

2. "Having the med reps with the best pR,, to Each percent statistic in the benchmarking data set has. include the detailing support input of the med o f c o u r s e ,i t s e r r o r m a r g i n . W h e n m a k i n g c o m p , t r i r o n s , r e p ' s " e n t e r t a i n m e n t a n d r e p r e s e nt a t i o n , , this error margin should be kept in mind. For example, privileges in the analysis of the data fromthe Gp seement in Table 3. "Having give-aways enabling immediate l 5 - l , w e d i d n o t ( o u n t . r 5B r d n dA A ' s d i s t i n l t c o m p e t i t i v e association with the brand,,to include the advantages tn'o ethical promo tools, ,,givearvavs,, and "sponsorship aspect in the point of prescription -.qualiiy of MDs to medical scientific conventions deiailing support of giveaways and symposia."

Table 15-l shows that Brand AA has a 4. "Having a product literature that gives the higher rating on these two ethical promo tools versus clearestproduct message,,to consider the quality competitors Brand BB and Brand CC. However, the aspect of product literature percent rating in each had an error margin rendering it as 5. "Offering the best and most distinctive product not significantlv different from the ratinss that benefit and feature,, to bring in the product c o m p e t i l o r so b t d i n e d . f h u ' . B r a n d A A ' 5 j 3 , : r a t i n s o n positioning inpui giveawavs was not really that divergent from Brand BB,s 6. "Offering the best value for money product,, to , 2 8 1 o r B r a n dC C ' s 2 q l . I t w d s , , d i r e c t i o n a l l v m orebut include the pricing variable t h e d i f f e r e n c ei s n o t s t a t i s t i c a i l ys i g n i f i c a n t . "?atients 7. never complaining that they cannot find the product in drugstores,, to ionsider marketing mix variable of distribution Designing the Conrpetitive Benchrnarking 8. "Made by a company whose products you most Rcsearch firr l,xisting (lonsulner protlur.ts believe in" io bring in the maker,s iorporate The competitive benchmarking research that we have lmage just illurtrated tor pharmaceuticllmarketine is easilv The guiding principle in deciding what to include or d d a p t e d to the more generalized car. ol ionrumei erclude proposesthat researchuseis take at leasf two products.

The preceding discussion furnished us with the c o n s i d e r a t i o n s .T h e f i r s t i s t h a t t h e c h e c k l i s t o f "building blocks" for undertaking a competitive

Table15'2 to Ask Questions MixBenchmarking Marketing Survey Benchmarking Product in a Consumer

Product: product benefits mostdistinctive Ofiers . ' . . .c. .t . . . . . . . . . . . . . . . , . . . . l s t h e b e s t q u a l i t y p r o. .d. u name. .. . .. .. . ....... .. ' brand lsthemostpopular package .. . .. tohandle Hasthemostattractive/easy Hasjusttheright# ofpacksizes.... . .. .. . . .. .. . ..

Pricino: . .. . .. .. .. . . . . ' formoney thebestvalue Ofrers .. .. .. .. .. .. .. . .. .. .. .. besttrademargin Ofiers (Advertising): Promotion ad Heard/seen/read .. ... ........,..,.. frequently admost Heard/seen/read .. .. . ..... . .. ..,.. . . . ...... .. said what ad Remember persuasive ad .......... .,...........

Hasmost (Selling): Promotion . ..,. reps....... .,..... sales Hasmost oersuasive repswiththebesttradePR.. .. .. .. .. .. . .

Hassales (Consumer): Promotion promo.. .. . .. .. . .. consumer Hasthemostfrequent pr0m0 consumer Hasthemostattractive pI0m0. ...... . ' in last consumer Have oarticiDated ..................,....

Satisfiedwithparticipation........ (ln-store): Promotion pr0m0.. . .. .. . ...,. ' in-store Hasthemostfrequent promo in'store Hasthemostattractive promo. .. . .., participated inlastin-store Have participation .. .., . ............ . ..... ..... with Satisfied (Retail Trade): Promotion . .. .. ....... ' tradepr0m0. retail Hasthemostfrequent ,. ... ...' tradepr0m0.. inlastretail Have oarticiDated .. .. .. .. .. . ...... . .. withoarticipation Satisfied (Availability): Placement consumers Hasthemostshelffacing never outofstock onshelf; lsalways ,......

Hasbestdisplay forit. ....... . . .. ....... looked lasttime brand Found

tI

benchmarkingresearch.With thesebuilding blocks, we can now go directly to the areasof maior additions.and adiustments that consumer products' comPetitive benchmarking researchmay call for' We can examine theseimportant additionsand adiustmentsby Soingover eachof tire researchdecisionsthat a consumerproduct's competitivebenchmarkingresearchneeds' 'l'hr'

i't'

j

A I I -l.

lltspondtrrt-l )r'fini lion l)t'r'isiorl It is the respondent-definitiondecision that necessitatesthe first set of major additions and adiustments.The root sourceis the need to considertwo

x x x x x x

x X

x x

x x X I

x x x x x x x X X

x

resoondentgroups Aconsumer product'smarketingmix activities arl implemented to directly affect at least two setsof people,nimely, the buying consumersand trade customers, Particularly retailers This is unlike the pharmaceuticalmarketing of ethical brands where the iareetof the marketingmix effortsis only one:the doctors' i h e c o m p e t i t i v i b e n c h m a r k i n g r e s e a r c ha s k s ouestionsabout the product'smarketingmix activities ihose directly affectedby theseactivitiesalsobecomethe survev-respondents who must answer the benchmarking r e s e a r c hq u e s t i o n s . T a b l e 1 5 - 2 d e t a i l s t h e m a j o r benchmarking survey questions together with who,

GonsiderationsIn decldingwhat to include

between the consumers and the retailer customers, should be answering each of them.

T a b l el c - 2 i m p l i e st w o t h i n g , . T h e t i r s t i 5 t h e n e e d to , n . r v e l w o 5 e t 5 o l s u r \ . e y r e s p ( ) n d e n t s ,t h e c o n s u m e r re\pondents ar)d retdil customer respondents.Thc second implication extends from the first. This is the idea that a p r o d u c t ' qc o m p e t i t i v eb e n c h m a r k i n g> u r v e y fr\lll o.f,'umer hdve to be a two-survey research project: one for consumer respondent sample, the other for the retailer respondent sample.

or excludein competitivebenchmarking recearch: The checklistof benchmarking indicators shouldreflectthe prevailingmarketingmix toolsactuallyand cunen y in use.

Thoseindicatorsshouldminorwhatresearch usersconsiderthe cunenflymajorinfluencing factorsof a brand'sma*et shareperformancl.

But for the retailer customer sample, the idea of a panel offers a real cost-effective researci.roption.

The retail audit services of SRG (Survey Research Samplesizedeterminationis no different from horv it Croup) in the Asia-pacific Rim countries gather retail was done_in the special case of the pharmaceutical salesan6l531s5-yq;a ted dd ta from a panel o[ retail store oI benchmarkingsurvey.That determinationproceeded a l l t y p e s .A C B ( A u d i t o f C r e a t B r i t . r i n )d s s i s t e dd n d l e n t under theseassumptions: its system in up and initially running the audit . _setting service. It is this type of panel that we are talkine about 1. Minimal sampleto providebenchmarkingdata i n t h e c o m p e t i t i v eb e n c h m a r k i n gs u r v e y o f r e t a i i s t o r e s . on eachof thetwo total populationsof birying l h e s a m p l eo f r e t a i l s t o r e si n t h e S R ' Gr e t a i lp a n e l i s consumersand tradecustomersis enough.Thii randomly selected from a retail store census. An SRG implies that data analysiswill not extenJto each companv in any of the pacific Rim countries non,offering study population,ssubsamples. the retail audit service undertakes the store census everi five vears. To draw their retail store sample, marketing 2. Theresearrh_ users,acceptabledata accuracyis executives need a representative sampling frame. The oneboundedby a 957cconfidenceleveland an store census constitutes an ideal sampling frame. What error margin of 110% given maximum data these marketing executives can do is to buv the census variabilitv from an SRG company. In the philippines, SRG sells it for P1 million (aproximately US$37,b00).For those Thesetwo setsof assumptions who determinedthat a 100_ cannot or are reluctant to afford this amount, thev need sample size for each of the two study population is some !i.tble d Iternative. sufficient.

A practical sampling frame proxy is available from S a m p l i n g o f t h e b u l i n g c o n s u m e rr e \ p o n d e n t \ i s the product's distributor and itilist of retail customers. a . diflcrent m.ttter.lt (.rn follow the survey industry pr.ictice The retailer accounts of a large distributor usuallv cover ofa multi-stage method. This applies toeach of the study,s 204 1p,39', of th-eretailer population. However. they two or tour wa\res per year schedule. A two-n typlcdlly ca(ry 70.: to 80., crtthe retail volume and ave per 1'ear benchmarking survey means an every_six_monihs movement, a classic Pareto condition. Sampling from this schedule, while a four-wave per year rch"duln list of 20% to 30% retailer population generalii es to 70% i, a quarterlv survey. This is important to remember because to 8070of the business. population variability is different we llave emphasized earlier that the real power from data variability For example, while retall stores rnav and u s e f u l n e so s f t h e b e n c h m a r k i n gs t u d y c o m e si r o m g i v i n g be distributed across all areas of the country, data on i r t , r - m o n i t o r i n g c h a r a c t e r .T h i s m e a n . p l l c i n ! product's retail sales m.ry not follow the same h e n c h m a r k i n g: ,. u r v e y so n . t r e g u l a rp e r i o d i cs c h e d u l e . ' ' d istribu tion. Depending on the prod uct, ret.rjl sdlesmay The objective of repeated measurements over time be concentrated in a segment of stores in selected raises the issue.of"panels.,, A panel is ,,a fixed sample locations. For generalization, a more rmportant of stores, dealers, individuals, and other entities that reiain consideration is the pattern of data rather tian the i n t h c p a n e l r c l a t i v e l vc o n s t d n tt h r o u g h t i m e , a l t h o u e h population variability. a d d i t i u n s m a ; b c m a d e t o r e p l a c ed r o p o u t so r t o k e e p i t repre5ent,rtive,.tnd are repeatedlymeasuredon the sa'me Surlcr' l)al:r (loller.tiolr iuxl .tnalr sis v a r i a b l e s . 'B e l w e e na p a n e l u f b u y i n g c o n s u m e r s and a F o r i t s d a t a c o l l e c t i o nn e e d s ,a c o n . u m e r p r o d u c t , : . panel of retailer customers, experience has shown that benchmarking survey uses a structured interview the tormer is more difficult to manage and maintain than questionnaire. The questionnaire items follow a sequence the store panel. This is why we did not recommend it in anLl format similar to those in the benchmarline survev the preceding discussion of buying consumer sampling. of doctors. There are two dred\ ot difference, h"owerer.

Surttt llt.s;rorrrk'tr 1 Salupk. Sizr anrl Sanrplirrg

Mrs., in your last purchaseof (product category), what brand did you buy?

Q1

Q2

1 Brand AA 2 BrandBB 3 Brand CC 4 Brand DD Others: specifY ( /

1 2 3 4

2. What brand do You buY most often?

Mav I now talk to you about your perso-nal impressionsof the marketing activities of the four brandsof AA, BB,CC, and DD? IN THE IInterviewer: Rrcono t<lsponolNT'sANswERs USE THE A\S!\'ER SHEET BELOW' FOR EACH QUESTION' GIVE TrtE RESI'O-\.'SS EIIOWCARD TO HELP RESPONDENT

.q\st\rn.l 3. To you Mrs , which brand offersthe most distinctive Droductbenefits? +. Wtri.tl brand do you consideris the best-quality product?

5. Which is the most Populat most well-known brand name?

6. Which one has the most attractive packaging?

7. Which brand do you believe offers the best value for moneY? 8. Which brand advertisementhave you Iast seen' heard, or read?

9. Which brand ad do you see, hear, or read mos frequentlY? most 10. Which brand ad said somethingthat is memorableto You? 11. Which brand ad do you considerasmostpersuasive?

12. Which brand strikesyou asdoing the mostconsumer promotion over the past three months?

13. What brand has the most attractlve consumer promo? brand 14. buring the Past three months, in which part? take last consumerpromo did you 1 5 . Werevou iatisfied with your Participationhere? in1 6 . Whatirand do you notice has the most frequent store Promo?

1 7 . W h i c h b r a n d h a d t h e m o s t a t t r a c t i v ei n - s t o r e promotion? part?

18. in whichbrand in-storePromodid you lasttake storeswhere I ou buy this product?

the We now shift to the core questionnaireportion of t he i n A s r e s p o n d e n t s interview of retailer trade rn items preceding,we make use of the benchmarking laDle 1l-2.

1. As storemanager/BrandAA Brand BB supervisor of this lJrand LL section,which DD Brand brand of (product Others:specifY category)do You find over the Past three months as the fastest-moving brand?

1 2 3 4 ( )

Mav I now talk to you about your impressionsof theiour brands of AA, BB, CC, and DD and their marketing activities? lN THE IInterviewer: Rlcono nrsloxoll:Ts' ANSWERS USE THE ANSWER SHEET BELOW. FOR EACH QUESTION' G lvE THE I i E S P O N D E T T H E L P T O R E S P O N S ES H O W C A R D

eNslvsn.l 2 . Which of thesebrands do you believe is the most popular, most well-known brand name?

3 . Whose packaglngis the easiestto handle? pack 4 . Which Urand offers iust the right number of sizes?

5 . What brand offers the best trade margin?

6 . Which one has the most Persuasivesalesreps?

7 . Which brand has the salesreps with the best trade PR? 8 . Which brand offeredthe most in-storepromo over the past three months?

9. Which one offered the most attractive in-store promo?

10. bver the past three months, which brand had the most retail trade Promotion? in?

1 1 . \A4richbrand trade promo did you lastparticipate 72. Wereyou satisfied\'vith this Participation?

13. Whicir brand enjoys the most shelf facing consumers? of 74. What brand is alwavs on the shelf or never out stock? t : ) . Which one has the best shelf display?

First is the presence of t$,o questlonnarres: one for the buyrng consumer survev; the other, for the retailer survev SeconJa re the d irterencesin lhe core questionnaire item1.

The items are a cl.recklist of marketing mix elements, for each of which survey respondents say which brand to then is doing the most or the best. This does not mean that these atre forced-response items. The questionnaire provides other response choices. If, for example, survev r e . p o n d e n t \ f e e - lt h a t o n a p a r t i c u l a r m a r k e t i n g mir activitv no brand qualifies as best, thev can expres-s this o p i n i o n h v c h e c l i n g t h e , n o n e , r e . , p o n s eT.h e r r .t h e v can check_the "all" response, if they regard all branjs as qualifvin6;. And finally, if thev do ,.,oi k.,o- or have no ansh'et there is the "DK/NA', responsechoice to check. lo illu.tr.rtc whal each of fhe tn.o qucslionndires should look like, rve v",ill use the marketing mix items designated in Table 15,2. We start rl.,ith the qiestionnaire for the buving consumer survey Needless to say, we tvill not formulate the entire questionnaire. Instead, we u,ill concentrateon its core portion.

As in the questionnaire for the sample benchmarking survey of doctors, the two allow for consiclerabll flexibilit]' in what and how manv specificmarketing mix elcments to include. The guideline for nhat to inilude remains as before. Firstly, thev should be what elements L h ep r e r . r i l i n gm a r l e t t n A p r . t c t i c ei n c l u d e i n c o m p o 5 i t r s a h r a n , .rl m a r l e t i n g m i r . S e c o n d l vt.h e v , h o u l . l i n c l u J ! \\'hat the benchmarking executive sees as currentlv i m p , ' r t , t n _mt a r l e t i n g m i \ c l e m e n t si n f l u e n c i n ga b r a n d s salesperlormance.

Wlren it comes to clata analysis, there are trvo basic directions to take. The first is analyzing the benchmarking data just obtair.red. These data come in the form of simpli percent trequencv distributions of responses to the core ( l u c s t i o n r r , t i r ei t e m : . A n a l r s i . c o m p a r e \ tor e,ich b e r c h m a r k r n gi n . l i c a t o rt h e p c r c e n t a g c sa t t a i n e db y the ( I | e r e n th r d n d \ . I n l h e l r o c e s s ,c o n c l u s i o n s a b , r u t where each brand is strong and u'eak are made. The marketine nri\ eiements h here it obf.rins high rating* ars 11*drq.l o] .trength. Tho-e whcre it getsrel.ttivelv l o w r a t i n g sa r e r t 5 a r e a 5o t w e a l n e s s .

The seconclanalvtical directiorr rs a companson across . trme periods. This is basically comparing the benchmarking data of the current survev rvith those of the prcvious one or t\\-o. We emphasize once more that this is thc more critical and strategicanalvsis,a dynamic analysis as compared to the static character of the first one. As n'e alreadv said, it is the time seriesanalvsis that e n a l . l e rt h e h e n c h m a r l i n g m a r k e t i n A e r e . u t i v e , . , t o u n d e r s l a n dt h e c h a n g e st a L i n g p l a c ea n d a n t i c i p a t et h e l l l \ e l vd t r c c t l o no l l u t u r e c h a n f e 5 .

The real power and usefulness of the benchmarkingstudy comes from giving it a moniloring character.This meansplacang benchmarking surveys on a regula; periodlc schedule.

i i * i " r t l ' - :: Competltive Benchmarking Reseafch in Marketing Testyour benchmarkingdata anatysis skitts!

Thefollowinggvesyou two differenrcasesltuatlons.

Eachsituationshowsthe surueydataon marketshares of thetop threemajorbrandsandthehrespective perceived performances on severalmarketingmix inputs and activities.

Thedataincludethe,,none', and,,all"iesponses fromthesurveyed consumers andretailers.

Whichsurvey respondents arerefe edto by a datasetshouldbeevideni ftom the character of the data.

Theproductcategory andbrandsinvolvedin eachcase situationare not identifiedto respectthe requestfor confidentiality of the datasources.

Note that the percentages in manyrows sum up to morethan 100%because the surueyinterviewallowed multipleanswers ftom a respondent.

Answerthe followingquestions: L Whatis thecompetitive statusof BrandAA, Brand BB,andBrandCC?Usetlle ,,relative marketshare" indexasyourmeasure of competitive status.

2. Whatmarketingstrategydid eachof thesebrands

adoptin gettingto its respective competitive standing?

3. Whatwill you recommend eachbrandshoulddo with its marketingstrategyto improve its competitive status?

Dr. Eduardo "Ned" Roberto holds the Coca-ColaFoundation Chair in lrtemational Marketing. Recipient oJ thc phitiryinc Marketing. Association's Agora Auad for Markeiing Lduc4non,heis author(zoithphilip Kotlei of thegroundbreakin-g boof,Social.Marketing (tnnslated into seuenknguagel an7 th-reeother bookson marketing,including Usir_Fiiendlv l\4:rketinâ&#x201A;Ź.Research. .He islinishinga ftt'thbookon marketin[. lntentetA.ddress: <ned@sim.edu.phi.

brand Mostofienboughuused product benefits mostdistinctive Offers

t 5

17

14

tla

0

name popular brand lsthemost

20

1 8

l 5

I

0

sizes Hasjusttheright# ofPack

9

11

8

1

5'1

25

26

2

1 3

19

15

7

12

51

0

22

formoney thebestvalue Offers

..

I T I

besttrademargin Offers

48

ad Heard/seen/read

25

whatadsaid Remember

10

36

38

0

13

ad Hasmostpersuasive

6

30

12

39

11

salesrePs Hasmostpersuasive

54

38

22

2

4

repswiththebesttradePR Hassales

59

41

17

1

2

prom0 consumer Hasthemostattractive

t 3

44

46

0

2

promo inlastconsumer Haveparticipated

6

33

39

0

3

withParticiPation Satisfied

5

32

34

0

3

pr0m0 in-store Hasthemostattractive

55

49

27

3

1

tradepr0m0 inlastretail Participated

46

45

t 8

0

1

withparticiPation Satisfied

44

43

1 7

0

1

retailtradepromo Hasthemostfrequent

62

28

48

4

3

tradepr0m0 inlastretail Participated

53

t 9

44

2

1

withParticiPation Satisfled

52

t 8

42

2

1

outofstock never onshelf; lsalways

76

64

51

0

6

m Competitive Benchmarking Exercise #2 Mostoftenbought/used brand offersmostdistinctive product benefits

24

40

18

lsthemost popular brand name

55

19

IJ

Hasjusttheright# ofpacksizes

7

I

Offers thebestvalue formoney

38

Offers besttrademargin

.ta

1

0

0

6

0

56

22

39

8

I

44

'15

47

4

2

Heard/seen/read ad

78

47

32

0

Remember what adsaid

56

46

25

0

9

Hasmostpersuasive ad

43

46

14

0

3

Hasmostpersuasive sales reps

41

55

51

0

2

Hassales repswiththebesttradepR

40

58

49

0

1

Hasthemostattractive consumer promo

67

33

46

0

8

Haveparticipated inlastconsumer promo

42

20

38

0

5

Satisfied withparticipation

39

'17

35

0

5

Hasthemostattractive in-store promo

33

50

43

1

Partlcipated inlastretailtrade promo

25

43

31

0

2

Satisfied withparticipation

20

42

28

0

2

Hasthemostfrequent retailtradepromo

32

45

42

2

6

Participated inlastretail kadepromo

25

41

39

0

3

,'l

40

0

3

89

66

0

7

Satisfi edwithparticipation lsalways onshelf; never outofstock

58

REVIEW

The Asian FinalWake-up Manager's Calh Reform or Perish

By Plofe$or SonnYB. Coloma

erminator. Equalizer.

Emancipator. Eat Your heart out, Arnold SchwarzeneggerIssuethe final warning, the unequivocal ultimatum. This is the final wake-up call. There are no comebacks.It's do or die. Now or never.Reform or Perish.

Like action-PackedPulP fiction screen' Portrayed on the silver Sun:iaal' Means Prof. Rene T. Domingo's book, Quality a capturesthe reader'stotal attention until one emerges true believer in the proposition that good management is anchoredupon quality management' The book'i sub-title is even more ominous: Co?leot Vendidor.Thisteversesthe age-oldmax\m, caoeateffiptor (let the buyer beware).Let the sellerbeware' the author warns, becausecustomerswill no longer accePtgoods and servicesthat are not defect-or hassle-free' His formula is simple: remember,celebrate'believe' Part one Provides the reader with inconirovertible' well-documented, and irrefutable proof that' indeed' quality is the end-all and the be-all of survival in today's fiercely comPetitiveworld.

Wiih memorablestoriesof maior global disasterssuch as the Three Mile Island and Chernobyl nuclear meltdown, the Exxon Valdez oil spill, the Challenger are explosion, consequencesof disregarding quality catastrophic.

But his scenariois not all Sloom-and-doom He asks us to celebrate the triumphs of the survivors of quality such as Harley-Davidson, which fought off the mighty turf; onslaughtof Japanesemotorrycleson its own home nearfrom it MotoJa whose six-sigmastrategyrescued which extinction in a saturated industry; and Xerox "copied" thebestpracticesofworld-class companiesand

thus becamea pioneer in bench-rnarking' Belief in the quality imperative is then imbibed by the captive readerwith effortlessease' Part two then urges the believers to become "incite the quality revolution'" evanselistswho would H"eprescribesan eiSht-stePbattle plan for achieving total quality: quality mission (awareness),quality (guidance)' leadership (inspiration), quality policies oualiw training (enablement),quality empowerment attitude tirusti quality behavior (obligation),quality (conviction),and quality culture(involvement)' The quality challenge lies squarely on the CEO's shoulders. Quallty management is Primarily a leadership "Bad quality comes issue. Prof. Domingo emphasizes: Bad from bad management, not bad employees " manaqementmeansbad leadership and bad policies Palthree then gives readerspragmatic guidepostsfor kit' assessingtheir qu;Ity quotient' This book is a starter toolboxland handy reference rolled into one highly readable---evenoccasionallyhumorous-- package' Ifs a must read for today's CEOs who are searching their for the competitive edge that will propel Even oreanizationsinto product and market leadership his from highly benefit will gi,ernment *unig"." "somebody why lnlightening discusiion on how and whis the cioice of the people and gets electedinto office people"' by the PeoPlemay not necessarily work for the

ReneDomingo'sformula in 'Quality MeansSurvival' is

simple:remember'celebrate' believe.

Eight-StepBattle Plan for For good measure,there'salso a chapter on Zen and the Art of Quality which contains illuminating illustrationsof how a quality manageris able to attain personalrnastery.

The essentialvirtue of Prof. Domingo,s work is that he is ableto demonstrateeffectivelywhy every reflective manager, well-meaning professional, or conscientious executiveshould believe in the quality imperative and practiceits principles.Why? It is simplybecausebelief in quality is what good managementis all about.

Belief in quality breeds genuine respect for the customer. It fosters a culture of product and service excellence that is gearedtowardssatisfying,delighting, and surprising customers. Constant improvement in serving customer's needs is the only path to corporate survival.

By emphasizing that the quality imperative must be embraced with a senseof urgency, he eschewsthe orthodox notion that quality is an esotericconcernof production and control statisticians.By pointing out that most major global disastersare not accidentsbut casesof flagrant mismanagement,he has presentedthe casefor mainstreamingquality instead of treating it as a nice-tohave option.

"The most important lessonwe can draw,,, writes prof.

Domingo, "is that quality, like blind justice,can take the life out of a company regardlessof its long and glorious past." Two case studies drive this point home: the bankruptcy of an erstwhile lOO-year-oldcompany,A. H. Robins,which lost nearly halfa billion dollars in litigation arising from defective Dalkon Shield IUDs; and Dow Coming's downfall as an off-shoot of faulty silicone gel breastimplants.lronically,Dow Coming,smajor suppiier of silicon was Globe Metallurgical, a 1988Malcolm Baldrige National Quality Awardee.

Prof. Domingo walks his talk. He has endeavoredto make his book reader-friendly. Part one is especially impressive in terms of the excitementit creates.packed with statistics and live casesinvolving real-world organizations and celebrity personalities, it is as grippingly suspensefulas your favorite spy thriller. The book is generously spiced with catchy quotations, entertaining comic strips, and memorable lines that reveal the author's flair For thosewho know Prof. Domingo, this comesasno surprise. The author is popularly known at the Asian Institute of Management(AIM) where he teachesvarious management courses and directs the Advanced Manufacturing ManagementCourse (AMMC) program as Mr. Quality, a modern-day guru who practiceswhat

AchievingTotalQuatity:

Quality Mission- Awareness Quality Leadership- Inspiration Quality Policies- Guidance QualityTraining- Enabtement

- Trust QualityEmpowerment

Quality Behavior- Obligation QualityAftitude - Conviction Quality Gulture- Involvement he preaches.He eats,breathes,and lives qualitv. That is why he,too,is a welJsoughFaftermanagementconsultant who gives relevant and practical counsel to clients seeking refuge from the slings and arrows of poor quality.

After deriving satisfaction and delight from prof.

Domingo's book, here is a pleasant surprise: you can discussquality even with your kidsl "One day, while writing this book,,, relates prof.

Domingo, "our daughter Karen bargedinto our room to play her favorite nursery songtape in our cassetteplayer "Agonizing on what to write nexL I could not help overhearingthe first song lackand lill:lack andJill went up the hill/to fetch a pail of water/Jack fell down and broke his crown/and Jill cametumbling after.

"I asked myself if Jack,Jill or their mother was to be blamed for the disaster. Who or what could have prevented |ack's fall? I ihought there must be some quality issuesin this very seriousnursery rhyme,,.

Ifyou're still an unbelieveruntil this late juncture,try two more nursery rhymes which you can recite or sing from memory: LondonBridgeis Falling Down and Rocka byeBaby.Thesenursery rhymes likewise celebratepoor quality and subliminallyinfluence impressionable in-fants and toddlers about the inevitability of coping with manmade blunders and foul-ups.

Ifyou still don't get it, stick toArnold the Terminator.

Or post the author's favoriteYiddish proverb abovevour studydesk:"lfyou want your dreamsto cometrue,jon,t sleep."

Then, perhaps, there is no need for this final wake-up call.

TheAsian Manager's Roturto H' Lim Intevtew tora fDok Pro@t of P3c/essâ&#x201A;Ź,r

"Now I realizedthat my method of delivering the coursewas to Provokethe student into the exerciseof his power of thinking". Thus, when Capt Roberto 'Bobby " Lim was finally persuadedto write a book on " " his AIM course, Sourcesand Usesof Power (SUPR),a favorite of studentsand faculty for the past twenty years, his first move was to write his former students to invite them to be contributors to the book by recalling their "anything worth remembering" in participation and SUpR. Th."" questionshe included for thern to answer as follows: What do you remember about the SUPR Course?What did vou learn from SUPRthat turned out to be so significani and proved to be true after you left AIM? Wha"texamplesof the use of power did you learn a b o u t t h a t c a n b e a d d e d t o t h e c o u r s e ?M o r e o v e r ' ProfessorLim included a request for information about "the lifestyle You are enioying". are selectionsfrom some of the initial here Featured R o x a sd o e 5 P r o i e c tw o r k l o r s m a l l S u z y resDonsei. componier,the most recentbeing a ventureprojectinto the ;ilk industry. Shaikh Mohammad Ali is Center Managerat SysnetEducation,a Novell and Microsoft authoiized tesiing centerin Karachi,reporting directly to the CEO. Mikiya Izuma is Chief Strategistof Fuji Xerox' Sridhar Rarnaswamyis BusinessDevelopmentManager of SamuderaIndonesian group of shipping companres' Meimei Bauzon and Vitoon PudPunyavanich did not provide anv information about their lifestyle' \ \ l t . t t . 1 t r r L , r rl i ' n l ! ' l l l b ( )

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INTERVIEW

SL?(e)R

\lernol:i6s: Sourcesand

Llriesof Po\\-el' Izuma: Two events we had outside the caseroom : the visits to the fish market and the hot springs Aside from the fact that I am a stranger to these places, I recognized t h a t t h e s es t u d i e s g a v e u s a d e e P e ri n s i g h t i n t o w h d t power really means and how omnipresent it is arounrl us. "new" situations.Ramaswamy: Most vivid are the - wnlcn most of us would not play poker on our o\\'n r'r'erarely life, ln daily throw up new learning possibilities to proce*\ our e\perience: pause ' Bauzon, Initially it was scary Evervone nearly ran for the door in the hope of not being called to define "power" during our first session. Then it r'r'asstill scary' Everv time we enter the caseroom, all we could do was speculate on what the million dollar question was for the d'av which we had to answer on a one fourth sheet of paper. After a while, it was more scary With a video ia*"ra ."co.dit.,g everything that went on inside the caseroom, who would be brave enough to: doze off ? pass notes? be absent? But once we got used to the camera man, we started losing our camera snyness/ consciousness.Let me proceed with the main course First' t h e p o L e r g a m e H i g h s l , l L e s l o w > l a k e s :a m a l e u r s ' hurtier'; boi', men; thal night ot gambling showed sides oi people that thev would not normally exude Just goes to ihow that you can't rely on appearances An important lesson learned: everyone's realization of their risk tolerance levels. Second, Navotas lt was the pertect excuse to touch base with something only read in the papers or

]

n"ias, f remember Sun Tzu, the art of war' The " teachingof knowing your enemy" aswell as-"knowing "was very useful in various parts of my life l vourseli iemember the poker gameand the trip to Navotas Both w e r e q o o d " ' . a - p l " i o f d a i l y . u n t h o u g h t - o fu' s e so f po*"r] l rem"mbersiudying,thePALincidentThepower of knowledge and pro-activity were very evident ali: Weil, the fiist thing I rememberis that yo' taught the subiect(ldughterl.The coursegaveus enoughfood for thousht as t"ohow we shouldexploitpower whether in a caseroon or in a real businessenvironment'

I rememberSunTzu,the art of war.

Theteachingof "KnowingYour "KnowingYour' enemy"as wellas self' wasvery usefulin various partsof mYlife.

seenon TV: the common tao.They,renot so ordinary after .rll Thosehulungan("whisper") sessionsare probrblv moreeftective thanthe board meetingsI regularlyattenj.

Those people in Navotas close deils faiter that AIM graduateswith their businesssuits and laptops. Third, Laguna.Most important lessonlearned:iurvival. We learned how to give in, compromise, assert ourselves, speak-up,shut-up and be funny. \ \ ' l r a l t i i c lt r r u l e , t r rirr o n rl h e c o t r r s t ,l r . t t r l n r ( , do u t t , , t e s o s i g n i f i c , r nntn d f r u e . r i t oV r o r rl c f t . \ I \ l l Roxas; Know your enemy better than you know vourselfwas very helpful during the job searchpro."rs.

Sincemost of the peoplegoing for the samejob wereAIM graduates,then we were all equal in the eyes of the employer. For a job I really wanied,I Iooked up all the candidates,found out their strengths( in terms of past rvork experience)then I equaled or made little of those strengthsduring the interviews. I got the job. Knowing vour o!1n strength:and weaLnesses : I usedthis in mv ),JCOconsultancyworl. I wasgiven the assignmentto think of and implement a promo campaign for"ahousing .ubd ivision.

AIi: From the poker game(where I ended the biggest . loser),I learned how to handle one self in such a lJs"ins s i l u a t i o na n d h o w t o w a l k o u t g r a c e f u l l w y i t h h e a dh e l j high. [Suchis the casewhen oni encounters]iust another rr rong burines>decision.Handle your lossesand come out a winner.

Izuma; I learned that power is here and there. The m o s t d i f f i c u l t t h i n g t h a t b u s i n e s sp e o p l e s h o u l d understand would be how to find the power vou want a n d n e e d i n a p a r t i c u l d rb u s i n e s s t r u c t u r e . T h e seeminglyperfectsolutionin onesetupmay not be perfect dnv morein another.,etupin reality.

Puripunyavanich: San Miguel,s casewhich showed that a big businessentity has linkages with politics one rvay or another.I keep wondering whether or not thereis a way that the managementof a big company can run the businessthrough their own capabilitie; without gettrng involved in politics.

Bauzon: Out here in the real world,I,ve learnedthat: Sun Tzu's right. Chooseyour battles. The use of power doesnot necessarilyentail force.Thereis power in a smile. er en in silence.One ,usthasto practicejnd try themout to >eewhich oneworks for whom,and for whai situation.

Knowledgeis power No onecanpull the rug from under your feetifyou alreadyknow what ihey are tilking about.

You can faceanyone if you have the information"atvour fingertips.Saying,I'm sorry,I don't know, is tabol. lf you don't know, find out and strike back. Learn as much as you can. But be cautious. Don,t divulge everything that you know. Savesome for later, when you need i mo.t. Or find dn opportunetime wheneveryou drop the

I learnedthat poweris hereandthere.

Themostdifficultthing thatbusiness peopleshould understandwould be how to find the poweryou want and need in a particular business structure.

- Mikiyalzurira bombs.This takespatienceand control.The whole world is about power play. Initially it was frustrating. But then you learn to play the game. Justbe sureol your values and prioritiesand it'll work out justline. Thereare times when I look so meek and mild and still, I get what I want...that's power.Beslot all,enioylife to thelullest.Be d a r i n g a n d t r y o u t n e w t h i n g s . i h e r e w i l l a l w a y sb e somethingto be learnedfrom it. \ \'h,t | ( )tltr,r c\ant Pk,s ot thi, u:r. oI Porr r,r ,-litl vLru lr,.rrn

, r L ) o ut ht . t lc . t r lr. r ' . t t l . i e rt li r t l t l c L r u r . s t , l Roxas: Pro-activityi the innate power everyonehas to choosethe courseof his lite. pro-dctivityis actuallv using your power of choice.Control: even when going into businesswith a friend, itis still important that cdntrJ of the corporationshould be spreadequallybetweenthe partners becausewhen money comesinto the picture, it is inevitablethdt thingswill change. l z u m a : S o m es t u d e n t sm i g h t m i s u n d e r s t a n dt h e d ifference betweenPowerandVoney {or Reward).lthink that peopleare not always motivaied to do somethine for themselvesand others by mere monetary rewardi Although you had already included some articles or topics related io the subieci. I recommendthat Vou mav highlight the human power generatedfrom one,s heart rn some sessions. From my perspective,the strongest power alwayscomesfrom the human beine.

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Beat your eompetitors through Total OualitY PrenticeHall presentsAIM'sTOM guru: Prof.ReneT. Domingo

OUALTTY IUIEAITS SURUIUAL Costlf pnduct rccallsand larrsuitshavetuined and bankruptedcompa nies.Dan t be the next ane! Carcatvendida (Let the seller bewarell which OualityMeans Survilal sendsthiswakeup callto companies will no longeracceptdelectsas still paylip serviceto quality.Customers certainalongwithdeathandlaxes. fed rs,government . Findoutwhyproduct ntaLdisast€ lecalls,environme havethe samer00I clrsromers anddissatisfied !ape,medicalmalpractice, causequaiiiymismanag€ment. with thebooks . Authenticale totalqualilypfogram andstrengthenyour "eightstepsto quality and"qualityquoti€ntquiz ' easyto use manag rightthe lirst time practlclng Anyonewho hasto do something publicoificials,and engjneers, ers,doclors,bankers, sur findthisnont€chni.al should oth€rprofessionals aswell asenlight humanized vivalguidereffeshingly ening.

ReneT. DohinSo is a teachef,witef, andman He is the SimeDafbyProfessof agementconsultant.

Instituteof Managem€nt theAsian ol Manuiacturingat Manufactur directofolitsAdvanced andtheprogram Coufse.Trainedin Japan,he con ing Management in tbe iieldol sultsfor a numberoi Asiancompani€s _ o r dq u anl m a l a g , m ednnl dl e a nr d n u i al u - i n g .

"Prof.Domingohasprovided a delightlullywritlen bookwhichwill daz and iaclsand figulesabout analogies zle the readefwith caseexamples' Oualityandpro He has demvstifi€d of it. the lack or Management, Ouality fiom all ovel disastefs and successes Oualily of videdexcellen!descliptions and bookis a mustfofyoul corpofate researahed thewofld.Thisthoroughly privatebookshelf."

Allan Blackman,Dircctat,JuranInstituteAustraliaand PrincipalCon sultant,WDScattIntematianal "Helpingcompanies to attainOualiryhasbecomean industryin itself faii Theil grealest Yetnearlyhaliof all who startqualjtyeffonseventually cynicismTo cultureandovercoming the companys changing difficuLties: presents a s book Doningo Prof. issues' grappling with those anymanager richin pfac in realwofldperspectives steeped pragmatic Oualityphilosophy, ' with a uniquelyAsianviewpoinl and€ndowed ticalsolutions, Digest d Executires in'ChieJwa Jet Magsafsay,Edltu ''Thjsbookis TOMs cbicken soupfofthesoulandluslaslnspilinglts andmlsmanage passion for detailsandthefactsb€hindqualitymanagem€nt it ffomits manyfivalbooks.lt livesbyits tille andI distlnguishes mentcases longaftelothefshavebe€nforgotten' pfedictthisbookwillsurvive EduaftlaL Roberto,AsianInstitute aJltlanagenent PraJessar

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Values Management and Ethical Behavior: Cross-cultural for Business Implications Managers from IJS,EuropeandAsia-Pacific have different responsesto glving and

and gifrsandfavors'organizational receiving group loyalty

de' fhe setol hypodleses andbehavior?

Introduction study empidcal in this set out and veloped bed in The empiricalstudy desc this paperis basedon a propositionthat is basedon sometentativepropositions pre' there is a connectionbetweennational L h a lri k e l ye r h i c aal t t i t u d ecsa nb e to nationalvaluessuch ethicalbe- dictedbyreference cu[uralvalues.management thewofk of Hofttede in developed as those liefsand ethicalbehavioland that such (1S93), andtintlkely to tne (1980)andTrompenaa$ beliefsandbehaviofvaryaccording by shtedattitudes Thisproposi' behaviorcanbepredicted of the manager nadonality issues. ethical towards certain implications has rjon,oncesubstandated.

Hypothesis 1: Ethical beliefs will relationships: globalbusiness formanaging likelyatlitudestowardset}li' vary significantly between national forpredicting appropnate cultural groups. and,fordeveloping calissues; Hypothesis2: Differencesin in be differences lor hand]ing sffalegies studyis ethical beliefs between national cullieisandac[ons.The empirica] basednotsomuchon maiorstategicbusi- tural $oups may be explainedby ref' n e s sd e c i s i o n sb, u l o n d a } / - t do a v erence to differencesin nadonal culwhichmayoccurin tural values, siluations behavioral Hypothesis 3: Differencesin organizations. managementethical behavior between national groups may be exHypotheses betweenna- plained by referenceto stateddifrer Is therea relationship tionalculturalvaluesandethicalattitudes encesin ethical attitudesand beliefs.

86

The AsianManager

March-April/May'June1997

ResearchMethods. the The OuestionnaireemPloYS asIzraeii's situations same12 behavioral a variety 2), collecting Tabie in items tsee andcor' individuals both relatingto ofdata paper focuses poratepolicy.The cu ent indi only on the infofmationconcerning vidualbeliefsandreportedbehaviol R e s p o n d e n t sw e r e m a n a g e r s workingin their homecountdesViable wereobtainedasfollows:Ameri samples c a n ( n = 2 5 ) ,B r i t i s h{ n = 6 4 1 ,F r e n c h (n=30)' (n=29),Spanish (n=64),German from and Swiss(n=31).Smailsamples othercountrieswerecollectedandtentapurposes only tivelyusedfor compadson natronal and Trompenaars' with Hofstede's valuedimensions {seeTable2),asfollows: (n=10J,India (n=15),Australia Denmark (n=5).It ishopedthat (n=61, andThailand thesewill form the basisof futurecomparadvestudiesbetweenUS,Europeand

AsiaPacificcountdes.

ls-Jferg

a lelation3hip botween national cultural value3 and Results sthical attitudes and behavior? Do they vary according Resultsarepresented undef: to the nationality of the manager? ffris stuOy tests societalvalues,rcpresented by two the following hypotheses: itemsfor givingandreceivinggifts and favorsfor preferentiaitreat1. Ethical beliefs will vary significantly betwoen ment; organizationalloyalty,rcpre. nataonal cultural groups. sentedby six itemssuchasditulg. ing confidentialinformation,and 2. Differences in ethical beliefs betwean national uslngpersonalorganizational serv, cultural groups may be explained by differences in national ices,timeandresources forpersonal cultural values. rsei group loyalty,rcpresentedby two itemson passingblameonto 3. colleagues and claimingcreditfor _Differences in managemont ethical behavior between national groups may be explained by stated differences others'work; conflict betweenot an ethical aftitudes and beliefs. ganizationalandgroup loyalty,rcpresented by an item on not reporting others'violationsof organizational represents conflictbetweenorganizational ishmeanfor ,whatI believe, is correlated policies;and, conJlictbetweeenselfand anq Srouployalty('not reportingohe$' with ,whatI do', with the scorefor the group/organization,represented by an violationsof organizational policies'J and latter higherthan the scorefor ,what I itemon concealing one'serrors(TableI l. which showssignificantdifferences be, believe,. tweennationalgroup meaff,indicates that on otheritemsfor thespanishsam, National difrerences Frenchand Germanmanagers find this ple,thetwoscores areeitherunconelated, in ethical beliefs moreacceptable thanthe Americans and or the scoresare higherfor ,what I do, On both gifl gving andrecejving British,the former havingmeannadonal (exceptfor itemsl0 and 1l: seeTable I ). therewerenationaldifferences suchthat scoresof almost3 (outof a possible 51.

Thegeneralpatternfor the othernation.

Spanish, Americanand Britishmarragers werelesslikelyto believethatgiftsshould be accepted in exchange for preferential managementbehavior. scoresfor the formerarelowerman the featmentthanmanagers in Germany and Managersdo not necessarilyact scoresfor the latter.

Switzerland.

Alsowith givinggifts,there exactlyaccordingto what they believe, weresignificant differences suchtiat the althoughmostitemsfor ,whaf I believe' Comparisonsof ethical betiefswith AmedcanandSpanish managers wereless are correlatedsignificantly with ,what I measuresof nationalvalues. in favorof SvinggiftsthanweretheSwiss d o ' .

Itemswhichshowedsignificant dif. managers.

On the whole all managers Forthetwo itemson giftglvingand fefencesbetweennatonal group means weregenerally lessin favorof givingand receiving,for example,managers seem werecorrelated with measures fornational receivinggifts. morerelucrant toacrually giveandreceive vatuesareshownin Table2. . Foriremsof organizatjonal loyalry. giits:their scoresaregenerallylower for Hofstede's 'calling lndividualism Indexcor in sickto takea dayoff' wasalso wharrhevdo.thanforwhar theybelieve, relatessignincanfly w.ith all itemsexcepr seenasgenerally unethical, butAmerican althoughthetwo scoresaregenerally cor- Ior'usingorganizational services forper and Britishsaw this significantly lessso reiated.The exceptionto this are the sonai use-.

Correlations coefficienrs are ,pilferthanSwissand Frenchmanagers. scores of tie Spanish managers.

Themean negative which indicates that a high score ingoforganization materials andsupplies, 'do'scoreforacceptinggifts is higherthan lor lndividua]ism is associated wilh a be 'believe'score, was seenassignificantly moreunethical the and the two are nor liefhat accepnggiftsandreceiving gifts, by the American,SwissandBritishman. correlated.

Thiscouldindicatethatwhat callingin sick,pilferingsupplies and usng agersthanby the Germanmanagers. tiey do bearsno relationship to whatthey organizational supplies, andnot reporting In theotheritemwhichshowedsig, believe, buLindividual Spanish managers. othersforviolatingorganizational policies nificantdifferences betweennational 'do' scorescannotbe predictedon thelr are all unethjcal.

In a multiple regression goup means l'usingorganization services 'believe'scores: somemaybemoreready analysis, with each'behaviorsituation'as forpersonal use'lasin allitemsfororgani to acceptgiftsthan what they saythey thedependent variable, andwith eachcor. zationalloyalty,the Germanmanagers believe,others may be more reluctant. relatedvaluemeasurebeingintroduced scorethe highest.Theotheritem,which However,with thegivingof gifu, theSpan- stepwise in orderto examinethejrpredic-

comparisons orethicarberierswith ::j*il:trtr1:*i::ffi:j:l;:;::

Ma.ch-April/May-June lggT I The AsianManaper gz

All SocietalValues g'ftsi i.-eccepring

a) Beheve1 44

Ameri

British Frencll lqgIL.

1 16

125

1 38

172

Spain

Swiss

Fstat

FPtgbTulgyre9l .000 GeSw>SpAmBr' . 0 0 1 SW>AmBrFr

1 13

2 00

7 62

138 045 143

181 808' 232

35s

.004 021

Sw>AmSp

197

.085 .097

ns. ns.

524, 3 51

.000 .004

AmBPSWFT SP'F,

"o 189

.018 .097

Ge>AmSwBr ns

11.43

.094 .213

ns, ns.

0 87 0 85

.502 .516

ns. ns.

244 2.31

.035 .045

ns. ns.

136 i u * , . ' i i" r i . r ' i " gl o" , noi o r(aandb)4s2 i,"i"i"nii.iii"utin"nr "o;;;;; ' i ; i ; ; , ; a i a e h e "r 'es o ;

1.20 .600" r:o

125 '350" 16e

119 285' 186

138 720" 2oo

!t rqa4 !a!Lq83" !IeG].C!!g,lt

7s5"

801'

85e'

4.r2'

s75"

;#;'.;;i;;"-

Gtoupcompaisons

Meanscoresandcoffelationcoelficienls

Item

ii o-"" rio

119

1:19 1:19. ';91" t;','.. 213

421

272

.-

loYalty Orqanizational 129 a)Beheve ; il;iql;

108

128

1'31

141

107

123

t G andb) .44s' "je"tieudt.aa r.zi iii"-';Gandb) 33s' ajBelieve162 ngo(anization s.Pilfe 1.71 ."t",iri."-i.upprirt lioo

.664' r'ga 1.44 350' f sO tsz

535' 158 1.30 4s2 155 1,19

506" 120 1 05 350" 161 1,11

480b 141 124 602' 203

0s4' 150 157 017 163 1;8.3""

475 1 10 1 13 060 145 t,lu."

2.1A

2.59

L93

1.84

.800' 2.42 2.05 .831" 1.92 1.76 772

1.97 .597" .709' 2.23 2.72 210 2.32 .906" .670' 1.90 2.38 1.73 2.A7 691' _ .754

111

117

1 13

931

ns

13e

027

130

1 19

128

048

7e3 ns

285 131 145 574"

344 127 140 556b

'667' 142 1'39 485b

121 114

304 340

ns ns'

iliil;;i;T

;iD;

138

;f;r#; tn.i.i +.6"rii"q i"il['"'fj.'u"yon

on businesi

b)Do

2 08

t?anob) 6aB time oroanizalon d) Believe2 33 tri' Tatrnoextra 2 04 o) Do oersonalirne r la andD).646 ,br""x, "',C.) Believe218 il ljrinoorq"n'r"l'onul 1 99 servces-'oriersonal b) Do r la andbt .713 Grouployalty blametor a) Believel 1E 2. Passrnq

! " i , [ i J l " ' i . ' J . i - ' o. ,-i "i - - i . z o

1.25 148

196 730 216 1 76 598 196 1 68 618

713' 2 36 2 12 606' 227 2 19 .865

1 08

1 16

rlo

274" ;@ andb) .276 ;;;;k.; fOl r e d ti to r a ) B e l i e v 1e 3 6 7 . C l a i m i nc g r 6e 133 "s o m e o neel s- e sw o r k b ) D o Jn o!! t) 517" --6s2 Conflictbetween and organizational grouployalty 2.08 otE|s a) Believe 2.53 12 Notreportinq 2.08 2.43 b) Do of violalons

i!sq!:gi!o! !9!ic19s /G qnd-q 55q Contlictbetweenself and group/organization one's a) Believe 2.06 9. Conc€aling 1.88 b) Do errors r (a dld b) .620.

1,?5 1'9?. 1:?1" ';9?" 18s

- :1.

1.88 1.80 .704'

12s

11e

-010 703" 130 133 129 1 36 - -E4E: -......'61!1"

lS""

1.97 .496" 2.17 1.97 ..476' 2.55 2.10 .391'

2.20 2.06 .471'

2.87 2.54 .742

2.93 2.83 .690"

2.63 2.87 .678'

2.61 2.42 .648"

3.80 3.17

.003 .009

Frce>AmBr sP'Bt

2.22 2.11 .487"

2.08 1.87 .855.

2.28 1.96 .766"

1.71 1.68 .885'

1.97 1.83 .437"

125 102

.288 .406

ns. ns.

Notes:'Am(Am€ican).Br(8riliSh)'F(FBnch),Ge(German).sp(spanish)'Sw(swss)'ns'(notsignmcanl)+FPeaMnprdudmorntmre|aton fc whal|do,o<05bp<01.cp<001Meansconsarestrowrior'whaitlelreve.onsc€|e1-5(uneh|caF1.etica|=5)'andfor!hat|do'onsca|e1.5(infeqlldr1.@uentF5)

in the valueof indi lndex dom to improvethe qualityof life {indi- numberwho believe Individualism tivepower,Hofstede's andlookingforonesel[]. ratherthanpeopletakingcare vidualdecjsions, 42%of thevadanceof theitem vidualism), explained wnlch dimensions values otier Two This beings(collectivisml. on 'pilfering'a.:ld77%of lhe vadanceoi of fellowhuman gifts' feceiving 'not reportingothers viola- co elatessignificantly with areimpofiantforgivingand andnegatively fte item on gifts, are thoseof Ascrip on versusAchieveandreceiving theitemsforaccepting tlon . versusextemalLocus forindividu- andnot repo ing others'violations.In a ment,andinternal measures Trornpenaars 2 (percentage Achievement exp'airs of Control. lhismea5ure analvsis. quesdonnairerpgress'on djismwereIakenasseparale 'giving on famdepends thatrespect gifts'and 15% who disagree lndi 59%of vadanceof itemsratherthanvaluedimensions.

An 'not reportingothers' ilybackgound I correlale5 significanlly v i d u a l i s ml f e l a t e st 0 t n e p e r c e n t a g e of the variancefor with internallocus(beliefin own abilityto connegatively for eachnationallty violations'alsoconelates numberof managers with a beliefthat 2 (percentage trol nature)is associated Individualism who optedfor a beliefin individualfree- Trompenaars' 88

The AsianManager

Mafch-APril/May-June1997

ltems IDV - .73' gitu 1.,lccepting -.74, gifts 6. Giving -.68, 4.Calling insic* -.65' 9:liIe.ing 11.t singservices ns 12.Notreporting o$ers- .81t

Trompenaars Individualism Specific - Achievemenl -'1 2 I t'-i-" - .63' ns _.65, ns ns -.78'. ns -.70. ns ns - .69. ns -.74, ns -.63, ns ns ns ns ns ns ns ns .75, ns - 68.

- .68- .74 ns ns

Locus l -.12.

-.13. ns n" _.66, ns

Nolesr IOV{Hobtede 1980, Indrid |ndividualism3{individUa|Fsponsibi|it1'+=1n611.'o"n""o,'993'specifcvs'oifse.companyFovkjimhoGingi=spâ&#x201A;Źcifc);Ai:triewmentl1fi Locusolconbd:abj|ityIoconbotnature,+.inl6ma|)'on|ysignifc,ntrduclrnofeftcofe|ii"iJ'riJ"rt,l...r'"*.p.'.js''t.'or'rr,"ni"*irro Ame*:an, British, Frenci,Geman, Spenish, Swiss, Danjsh, AustElian. nai. lndian.

gift givingandreceivingis unethical.On Ageat dealof careneedsto begiven ofbusiness ethics.Onewouldexpectques, a regessionanalysis with ,accepting gifts, to the interpfetation tlonnaire resultsto leld suchan assoclaof suchresults.For as the dependentvariable,Locus1 ex. example,our smallsample of Tha rnan_ L j o nb e M e e ni t e m sf o r ' b e l i e v e ' a.nddo , plained52%of thevadanceandAchieve, agersproduceda mean respondents of 3.20for item 1 but generally, indicatethat ment2 explained 32%of the variance. and2.75 lor item 6, indicatinga some. tiey afenot asethicalastheywouldlike On Trompenaars' item for Specific what favourable theSpanish disposition resultof no as towardsgift to be.Perhaps 'believe' ,do' versusDiffuseSpecific1 (percentage who gvingandreceiving.

However, and for we should sociationbetweeen disageethatthecompany shouldprovide not concludethatThai,Swissor German someitemsis an abberation, perhaps or housinglcorrelatesnegativelywith the managers arelessethicalthantheircoun this is indicativeof a lackof connection item 'callingin sick,'andpositivelywith terpafisin other(Western) for certainethical countries,Ouf betweenan aspiration the item 'usingcompanyservices for per- thercgardforethicalconductis diferent. standards andthepracticalities of thebusi sonaiuse.'In a regression analysis, this Wearenot askingif managers ness situation. fromdiffervaluemeasure explains58%of vanance. entcountries H)?othesis3 is supported.These haveworseot betterethical Thiswouldindicatethatthemorea man- attitudes,but whetheror not theseare resultsmustbe seenwiti cautionascoragerbelieves in a specificorientationthe different.In factthepreliminary resultsfor felationsaaebasedon the meanscores morehe or shebelievesthat usingcom, Thaimanagers showhighscoresthrough- from a smallnumberof countries,with panyservices is acceptable ethically.The out,witi a 4.00foritem I 1 indicaturg drawnonly fiom Western an viablesamples measure for LocusI is alsocofelatedsig- overallacceptance of usingorganizational cultures.The factthatan association ex nificantlyand negatively with thjs item, servicesfor personaluse.Thiy doesnor istsbetweenindividualism andthe belief indicatingan association betweena high meanthat Thai managers raised by thequestonnaire would be less Lhattheissues intetnallocilsanda beliefthatusingcom- ethicalon thisparticular issue,ratherthat itemsareunethical,maybe indicativeof panyservicesfor personaluseis unethi- it is not seenasan ethical issue.It may the factthat theseitemswele conceived cal. alsohavebeenrhewrong questionnairein a highlyindividualistic nalonalculture.

But to aska Thaimanager, this tl?e of expianation doesnot exand,/orthe result Discussion is a functionof a SpecifiaversusDiffuse plainwhy theotier Hofstede dimensjons Therearesignificant measurable dif. dimension(seeTable2). However, do not conelate with such a belief.

Of all there fercnces betweenetiicalattitudes ofman- sultsgenerally the cultural dimensions supporthlpothesisl. studiedoverme agersftom differentwesternnationalities, Also hypothesis Individualism.Collectiv, 2 cannotbe re_ lastfew decades, but thesearenot majorqualitative differ, jected,as generallythereare significant ismis the mosrpersisrenr andpervasive. ences.

Thesedifferences femainsubtle,yer correlations However, it has betweenwhat managers been argued that collec be maybeimportant because of theirsubdery lieveandwhat theysaytheydo. It is per- tivismengenders organizational commitThesedifferences seemto bein the areas hapsdiffcult to substantiate is perhaps 5hownby fully rhishy. ment.The reverse of accepting and gtvinggifts,certainas- potiesiswithoutsomeformof validauon the resultsabovethat the moreindividupectsof organizational loyalty(callirrgrn of thisresultthrough,forexample, obse.v- aiistic, the moremanage$believethat s i c k .p i i f e r i n sgu p p l i e u s ,s i n go r g a n i z a . lng wnat manage$actuallydo. Thecon issues of organizational loyaltyareunethi, tionalservices) andconflictsbetweelor- nectionbefween attitudes andactions is cal.But thismaysimplyindicatethatthis ganizational andgrouployalW Inotreporl- an areafraughtwith difficultyin social isanissuein moreindividualistic cultures, ingothers'violations oforganizational poli psychology andlittle work hasbeenun, and not an issuein collectivistsocieties. c1esl. dertakenregardingthisissuein the field Perhaps, a coffelation with giftgtvingand Ma.ch-Aprif ,/May.June 1997

The AsianManaper gg

receMngis morepredictiveof Individual(ratherthanascrip' ismandAchievement internallocusof an and tion of status), contol. It is pelhapsalsoindicativethat the Americanresultson gift givingand receivingare the lowestin tie cuffent studyindicatinga beliefthat suchaction andthaton allnationalvalue is unethical, are thef scores whichcotrelate, measures studied. nationalities of the highest the Implications for Global Business Theresultsofthisstudyindicatethat maybemade certaintentativepredictions and aboutbothethicalaftitudes behavior' on the basisof knowledgeregardingbroad nationalculturaldimensions. with For example,doingbusiness high fiom a highindividualistic' someone andintemallocusof contol achievement to give societymayindicatea reluctance of the basis gifts. on Also that ard receive Western the currentresults,limited to cultures,a high individualisticnational culturemayindicatea strongerloyaltyto thana lessindividualistic one'scompany, culture.

Of coursetheseresultsneedfurther particularlyin awiderspread investigation, Eulopeand ofcounfies,includingEastem AsiaPacificcounuies,andalsoin a more in-depthstudywhich providesvalidating qualitativeandbehavioraldata.Thiswould providemore extensiveinformafonremakingintheglogardingethicaldecision bal context,andwould help in develop' stategiesfor handlingdit ing appropriate in ethicalbeliefsandactions. ferences *This is an excerptfiom Dr. Li's in the ADSGMlnterna' paperpresented 1996.Healso Conference, tionalBusiness thanks ChristopherAllinson and John Hayes,LeedsUniversity;TerryGarrison, College;Richard HenleyManagement School: Graham,HampshireBusiness PurdueUnive$ity; Martin Rapisdrda, HolgerHaedrichand SvenReinecke' HochschuleSt. Gallen;Kevin Faggand Univer' KenDooley,CentralOueensland

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How to Manage Competition "lfyou cannotbeatthem,join them." know thanthe devilyou don't.AskPhil' dsk is inventory.\ryhena markettakesa Jointly,they can steepfall, everyoneexits;taders think WitI economicgowth slow and in- ippine oil companies. difficult, theycanoutsmartcompetitionandgetout flation under con ol, profitsare under makeenuy ol new competjl.ors they canimproveindi- at higherp ces.lln reality,however,eve' hea\rypressure.lf all thingsremainme whereseparately A goodwayt0 man' ryoneis rying to sellat thesametime,at shares. themar- vidualmarket to squeeze same,buyersmanage pandemonium:de gin over time. Costreductionprograms agecompetitionis to increaseenuy barri- anyprice.Paniccreates pressespricesfurtherIn Januaryfueloil areprevalent, ers. mergers Iikedownsizingand lf you are sinply buyingand selling, fellfromUS$120lmetdcton to US$88in but cost reductionscan only go so far. while it remainedconstantin ultimatelyhas to thenyou arenot addinganyvalue.Value- Singapore Margin enhancement arecdticalfol long'term Japanat US$145.In Februaryprices addedoperations competition. focuson managing to US$135inJapan.Fueloil sup' Outsmartingcompetitionis the first survival.Backwardintegrationof opera- dropped lostUS$32Mwhile supof plie$ in Singapore margin.In our business bruisedbut do not Uonsincreases step.Getcompetition a softlanding.l tuel oil dellveryfor shippingcompanles, pliersln Japanmanaged makethemdisappear. the cooperation? ftom Who benefits from components by buying value The oil industry for instance,has we add gain on rhe size depends does: in Everyone them and blending refineries isbetterthancon' different leamedthatcooperation commodify In the share. their market of and in terminals We invest terminals. our ftontation. by avoiding loss'producing Listen to RocKellerduring the early bargesalsoto capturelogisticsbusiness business, you can doubleyour profits.In montis, benchmark When our competitors daysof oil find:pdcewa$ wereastegular margin. indusuy,youcandelayprice asshowersin theuopics.Bankuptcy'the againstus, they facetheseprofltsfrom the consumel andthus achieve20%40% eIorder of the day.If the cEo listensto backwardintegration.Proflt shifting,asa reductions time. over fect a feat. with us becornes marketing{whosegoalis competitorelimi- way to compete get fat, dumb, and Do companies nation),the companyis in for a low mar' Thismakesus a leaderandwith the up' is the real danger.You that Yes, happy? way is another per truce.

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US anti'trustlaws prevent can seethem in regulatedmarkets:oil competition. with com- of managing ftomcommunicating marketing New in India,Philippines, companies in compsychology of cooperation The istheone department petition.TheSupply put more t0 tend Corporations Zealald.

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i. How would you rateT,{Mfeatu-res? a) Length long 0 Aboutright 0 Rather too shofi Someshat 0 7.Youtravelabroad b) Treamentof subiect 0 Lessthanoncea Year supedicial 0 Somewhat 0 At leastoncea year 0Justnght 0 Too scholarl.v 0 Morethantwicâ&#x201A;Źa !/ear of subiect c) Coverage 0 Average 0 Limited 8.v'henyouravel,vourcountryofdestination 0 Faiflycomprehensive ls ln () Asia 0 NonhAmerica 8. HowNouldyourateTAMregularseclions?

0 Otherr0 Europe a) Lensth ()Ahoutright tIRffilong be to your expertise considet You !. tooshort 0 Somewhat management 0 general of subiect b)Treatment management Q delelopment superficial 0 Somewhat management 0 finaocial 0jusl right 0 Tooscholarly develoPment 0 humanresources of subiect c) Coverage management 0 operations OAverage 0 timited management 0 marketing 0 Fairlycomprehensive management technology 0 information

0 Other: 0 \ot aPplicable

0 otherr

94

me AsianManager March-Ap.illMay-June 1997

9. HowwouldyourateTAMcoverstories? a) Length I )Ahoutright long 0 Rather tooshon 0 Somewhat of subiect b) Treatmenl suPerficial 0 Somewhat OJustriSht 0 TooscholarlY of subiect c) Coverage OAverage 0 timited 0 Fairlycomprehcnsive wouldyouLiketo readevery 10.Whichsections (Pleasecheckallthatapplies) issue? s Comer 0 Entrepreneur 0 GemsofCommunication 0 MoneyMalters UPdate 0 Management Ethics 0 Management 0 Insight () TravelNotes 0 FieldNotes Notes 0 Conference () Management andtheAfis andHeahh Management 0 0 A caseIn Point Bookshelf: TheAsianManagers book 0 Previewexceiptfroma fonhcoming froma newbook 0 View-excerpt 0 Review'bookrevierr projectin progress 0 lnterview-book to otherbusiness/management1i. Compared you tead.how wouldyou orientedmagazines rateTAM? oi Editorials a) SBndard 0 comPanble 0 befter 0 needsimProvement (tables. et!) & graphics b) Photograohs 0 comPanble 0 bener 0 needsimprovement c) Valuelor Monev O comPanDle 0 bener 0 needsimProvement 12.Vhydo youreadTAM? trends () to keepupdatedon management atAIM 0 to knowdeveloPments 0 Otherr shouldbe: benchmark 1J.TAM's Review 0 HanardBusiness Week 0 Business 0 Foftune

0 other: f,i. Yoursuggestions:

JointVenture Misadventure?

Ti,ustand relationships are integralto doing business "l n 1991,Mr.Yao, a Filipino.Chinese who volveddetermining whetherthe foreign calledMr. Yaoand informeo f Iwished to investin a jointventureln partnerwas trustworthyor not.Tothe him of the matter.At first; Mr. Yao China,approached BianLim Tan,an em- Chinese, trustandrelationships playedan d e n i e d t h a t t h e m a c h i n ew a s n o t ployeeof theChinese Embassyin thephif integralpdrt in doing business.Verbal new. Later on, through a series of ippines.HetoldMr. Bianthathe hadGer- agreemenB werecommonandconsidered n e g o t i a t i o n s , M r . Y a o a s k e d f o r man-made equipmentfor manufacturing binding.Forexample,it wasnot unusual time to think about the matter. He plasticproducts.However, sincehiscom- for unpaidgoodsto be deliveredevenif s a i d h e w o u l d j u s t c a l l m e f o r h i s panywasnot into plastics,Mt Yaowanted the sellerhadonlythe word of the buyer reply." to flnd a partnerin Chinawho hadexpe- to relyon.TheChinese alsopreferred low dencealongthisline of business. margns(providedUustwasmaintained) Mr. Yao'sLogic In June 1991,duringthâ&#x201A;Ź China to highmarginone-shot deals.

Accordingto Mr Yao,while his tradeexhibitin Manila,Bianintroduced Thistrust,which wasusuallybuilt equipment wasnot"state of thean,,'it was Mr. Yaoto the delegailon headand divi 0n preuousexpe enceswith a pafiicular newbecause it hadneverbeenused,havsionchiefof the SuyDongForeignTrade person,was"transferable" to one'sfriend. ingbeenkeptin storage.

Unfortunately for andRelations Committee, Mr Ty.Tywas That is, a Chinesebusinessman would him, expertswithin the organization on muchinterested in the joint venturepro- fiust a third partyunknownto him by vir. whosereportsandopinionsYao'sparmers posalof Mr. Yao,asparmerships with lor. tue ofa recommendation offriends.If the basedthet judgments,declaredotherwse. eignentitjes in Chinaentjuedvenruing third parryprovedunreliable.however, Besides, Ift. Yao'sequipmentdid not degroupsto certainpriyileges.

In no timeat two relationships wereaffected:that be- liverthe promised volume. all, Mr. Ty signedan agreement with Mr. tween the third partyand the businessYaoto starta joint venturein Shanghai. man,andthat betweenthe businessman Bian'sDilemma Afteronlyfour months,the Chinesegov- andhis friendwho madethe recommenThesedevelopments deeplyaffected ernmentapprovedthe joint ventureof dation.

Bian,who had hopedthat the venture Messrs.Yaoand Ty. wouldbe successful.

HebelievedMr. yao The Problem to bea uustworthybusinessman who conThe Investment Climate in China So it was in early 1992, some tdbuteda lot of 'goodness' to China.

In the early1gg0s,Chinawasstill months after Mr. Yao'sGerman-made "l had sougglingto buoyits economy, not hav. equipmentwas installed,that Bian Lim s u c c e e d e di n p u s h i n g ing yet developed into a havenfor inves- Tanwasinformedthattheequipment MI. some similar projects.Why not this to$. Thegovemmentwasgratefulto any. Yaoclaimedto benewwasa 1970smodel o n e ? C o u l d he be cheating this onewho sawpotentialin thecountryand andresultedin low productivity.

Hispart- t i m e ? C o u l d t h i s e v e n t b e m y broughtin capitalandrechnology despire nersthussuggested thatthe old machine 'waterloo' and spoil my future?" the dilficultieslnvolved. bereplaced with a newone;othetwise the joint venturewould cease.BianLim Tan Bianknew he wasin a positionto The Selection of the Venture Partner wasaskedro informMr. YaooFhis part. senda letter to china to sroprhemfrom In the mainland,the selectionof a ne$'request. complaining. on the otherhand,the chiforeignpartnerin a ventureusuallyin. nesegovernment approyedthesethings, March-Ap.il,/May-June 1997 | TheAsianManaper 95

goodphysiognomy andspeciflcph)'sical arcrcinforced of course, These, features! bydeditableperformance.

Messrs.Bian,TY,andYaoareChinese.BianandTy behavedtowardsYao cul' common of anassumed onthebases un' common and values, ture,common he Yao is Chinese, Butwhile deFtanding. in and all is ove$easCNnese'Nanyang, from South probability, a descendant China. of SouthChinaareIeThepeople of moneymake$ putedto be unabashed pasgreat their one China.Byreputation, Lotsofit.And sionin lifeisto makemoney.

TheJointventueofMr.Yaoandhis that can8et awaywith whicheverway LessonsLeaflred not towhatwas partne$ftomChinadidnotpushthrough theycan.UnlikeBianandTy,Yaohad toadhere Bianresolved legime. livedundercommunist 'right'and'good.'He reported his deci- in theend. for not having Bian fault can One from Counselor sionto the Commercial His in denning'new." under Baluyot specific beenmore the Ministryof ForeignEconomicRela' mis casevtaswrittenbyMs. 'Chinese-ness" his that assume him Research made Deanfor olAsnciate hisptob- thesupevision whounderstood tionsandTrade, a Chinese, also Yao, newacquaintance, Gavino, Jr. lem,andsenta letteron behalfof the h Jacinto "new"ashe(Bian), I believe, define would the ioint terminating to suggest embassy art. Thisbeliefis had,l:e.,state'of'the Mr.Yaogaveupsome venture.Ultimately, onthefactthatChinaismodemiz' based hisChinese thelosses toreimburse shares wouldwantto leaplroginto cur' and ing Cultue Hurdles parmers hadincurred' thathasbeen something lrPez technology, rent BianLim Tan Commentby Prof' MaYo Thusenlightened, and statements omcial madeclearbymany for cameup with personalguidelines in China. ofinvestors futureProiects: This incidentinvolvescultule-basedaccounts recommending have partlybut it is more Yao,andwein thePhilippines, I expectations "investo$' goup like him (a choose seenmany "l should know both sides aboutthewaYsomebusinessmen people people of Malay'Indian, most ways includes These which business. clearlybeforeI makeanydecision' to do andother Chinese, In nu' over.

Spanish, world wrong the American, as The key issuein PuttinguP a suc- condemn people machines old model buy unused however, descent) -the cessfuliointventureis mutualben' merousinstances, ofspecu' public form enanother as in atabigdiscount thepractice efits.The two Partnersshouldun- who condemn at the bool$ place their it in is thecase lation.They derstandthe businessfullYand do gagein it willingly,asI believe price. the theycan original,non'discounted At first a goodfeasibilitystudyon the pro- with Mr. Yao,in the hopethat 'new,"t:e.' theypanit offas getawaywith it. opportunity, posedjoint venture." "unused."

Cledly thereis a greatdifferManyof us who havedealtwith 'state'of'the'art' andunpeoples anywherein the encebetlveen "The big mistakeis that the moretraditional palusof place which for on to someone value they But used. partiesare usuallYso eagerto \rrorldknowthehi8h isnor' can") what one de' with on $ust ("getting away based relauonships reacha deal.The usualProcedure personal to make. trust mal,theequationis convenient collateral should be: memorandum-agree' velopedovertime,andthe recommended In this case,Yaofaileddespitehis place individuals upon they pracBut the usual ment-contract. anda belatedattemptat assuaStothembyftiendsandtustedassociates- protests ticeis'morehaste,lessspeed." "a ftiend's parties, TyandBian.But myfriend'.In ingtheaggrieved friendbecomes Mr. thedamage hadbeendone. " Businessethicsis essential thiscase,Mr.Yaoviz Mr.Tybecause Bian the intlo' I agreewith the conclusions in transactions.One can cheat Bian,hustedby Mr. TY,made These experience. of the attheend reaches some peopleat certaintimes but ductions. ale onemustleamwhen lessons and confidence hard trust are this How one cannotcheatall the Peopleall with a certainkindofbusiis normallya longandtedious doingbusiness the time.In the long run,the one established not though to share, I hasten Butthetrustcanbeginquitefast nesspeople. who triesto cheatotherswill cheat process. heard positive I once what quite note, than cheerful more a nothing with stuting himselfin the end. "gut feel'within minutesof the first froma colleague.

He said,"ln business' "good you haveto think maliciously.'This the "Some officialsin chargeof encounter.

In somecases, than mole mindsetmaysparcyoufromthepainsufprojectsin Chinaare bureaucratic feeling"startswith nothing

For If it and lacktechnicalexperience. andthecontmctwasomcialysigned. come not even do they image example, wasstopped,the Sovernment's to the siteto inspectandassessthe mightbemarred.

Yet,if thejointventurecontinued, machinesthey haveinvestedin." wouldthisnotIeadto evengaverprob" T h e C h i n e s eo f f i c i a l s i n it mightanddecided Bianbelieved lems? chargeof ioint venturesshould accordingy. learn more about the market "At last,I madea decisionto e c o n o m y a n d f o r e c a s t e v e r Y end the joint venture.lt did not projectbetterto avoidlosses." matteranymoreif it would affect " S m a l l m o n e ya n d b o u n t y my future.Therewas no balance b e t w e e n ' r i g h ta' n d ' w r o n g , 'o r shouldnot spoiltheir ethics.They 'good'and'evil."' shouldnot allow bribery."

96

me AsianManagetI March'Apr /May'June1997

feredbyTyandBianbut it makestheconcept of businessethlcssoundlike an oxlmoronl

ries in China (andother Asiancountries) rights issues.

Thelegalandpolicyframeto train in his shop.He expectsthat work will evenrually followftom appreci. throughthisway,he will be ableto esraD- atingthevalueof financialdiscipline in a lisha solidlinkagewith thepeoplein A"sian marketeconomy.

- ProJMadoAntonioG.Lopezis Pitipinas countliesandmakesurethattheperspecThereforms,/policies ale onlyone Shell CoryorationPrcfessorof Pubtic tive towardsbusinessale well known to side.The othersideis the workerin the Administfttion,AIM. InternetAddrcss: eachother.I would expectthat the com. factoryBeforethe openingup of the Chipany will soonhavea valuablenetwork pez@aim. <maglo edu.ph> neseeconomyr thefewasno conceptof within Asiaandthe business vrill flow in deliveryrime and goodmanufacruring his way. pmctices, packagngor marketing.What Knowingthe right peopleto do busieachoneproduces is okayasgovernment nessis onesbongadvantage.

At thesame Compatibility of Values p dictates the ce. If thereis a defecuve time, havingpeopleyou can tlust ftom of Joint Venture PartneN product, then,conectit in the nextship. you whom canobtaininformationon po.

Comment by Prof. Etsu Inaba ment.

But it's dilferentwith foreignpartpartners' tential valuesandoutlookis anners, and t}Iey are lesspadenrto rain. otherimportantassetyouneedto develop h e a rs r e r e o r y p eo sf C h i n e s e There \/[/e is a need to appreciate the cultural in the future.

Y Y business asta)rcladonbaseo, ano dislocationthatjoint ventue factorieshave (bJ long term in perspective.Both Prof.EtsuInabanow headsthe AIM createdfor the workers.Goodsare not observations aregenerallytrue. However, Reptesentative Officein Japan.Intemet producedon time.Clientsarelost.There thosearenot themonopolyof the Chinese. maybe no next shipmentto correctthe Addrcss: <inaba2@9a2. sonet. or.jp>.

ManyAsianbusiness tie-upsandlinkages defects.So,everlthingbeginsto fall apart. are basedon humanrelationsand long On the humansidethen,fot a joint ventetm associations.

In my researchon ture to work, the pathers haveto behonjoint Japanese venturesin Asiancountries, Of policies padence estwith eachothe4especially aboutmuand the sameemphases were expressed on Comment by Tony tual expectations. partner The foreign has Go Kian Luy mostof theirparhers.In fact,asinglemost to be patientwith the Chineseandmust jointventure criticalissuefor a successful o appreciare tlis case,onemustlook havea deeppocket. is the compatibilityof the valuesof the f I at the reformand policiesin China. partners.In other words, the partners' '73, In themid-1990s, thertwastightlending * TonyGoManLuy,MBM isManaging valuesandperspectives not onlytowards of Dominion Chemicals. becausemany joint ventureswere noi Director the businessbut also towardslife and working.Jointventuresthen involvedlo. societyhaveto beln linewith eachother. calgovemmenh.No onehadthe money Hov/ you treatthe employees, how they tien, so rhe localgovernments were,in aretained, how the distributionof ftuits effect,supportingthe individuals.There of businessactivitiesaresharedamongthe case in point_ wasnocommerciar rawinprace then, ei. Erratum: ii|Jii"-rliiir.i.'u"v" 'i;;;;-'"'-stakeholders would all stemlrom the basic " ''" ' ther.Policies weretopsy-tunry'.

TheCenvalues.So,beforeanyonetdesto forma ral Bankhadnorclearlydefinedthere. jornt venture,as a matterof routine mittance 0fproflt.Foreign investo$ were Thistraditional, practice, communal oneshouldthorouglyinvestigate waryaboutwhatChinawill do.So,the places society, ihe nitfrest vatue the potentialpartnets'values,maybe practice wasto seliusedequipment.

Ar on the fimrty as a iextended) though otherbusiness partners,andcircle thattime,atything youthrowln wasstate- socio_economic_politicat support of hiends. of-the-art.

Therewasa tendency to over- network.you tiust your own, I knowofaJapanese ownerol a me- value because theexcesswas used tocapi- startingwith the family and its dium scaledie makingfactorywho has talizeinvestments.

For example, if the members, affinalrelations, fellow been trying to establisha businessin equipment's vaiue is PHPIM, it was valvillagers, and so on in an ex_ China.He hastrainedquitea numberof uedat PHP2M,andthe excess panding,intricate,complex,and PHPIM technicians andoperators ftom Chinaon theinvestment in thejointven- oftencomplicated networkof resophisticated equipmentfor die making became tule compary. lations.

This way, In youcall for the an emergency, foreign with the hopethat he would be ableto investor on members group at that time, of therewasnoriskat this for establish a linkageandeventually form a help. Ruben, lthink, simply wouldthenlendon joint venture.Unfortunately, the people all.TheCenfalBank of whatever amounttheyhave. wantedto be sure that nothing whom he rrained,oncebackin China, thebasis willbelefthangingandhetrusted didnot workout would soonfind a job as an inrerpreter, A lot of iointventures 19g5_96, theCentral rathertian a shopfloor technicianand wellandsoin Bank his retationsto help him do that. i$ lendingpoiicy. operator.He then decidedto invite rne dghtened Butthennew problems secondgenetation came up: property of the ownersof factobankruptcy, March-April/May-JuDe 1997

TheAsianManaper

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