The Asian Manager, November 1995 Issue by Sherbet Manalili

T'F{EASIAN ""oo*' Lc9 OCTOBER/ \OVE\{BER1995

V O L .V I I I \ O . 5

rE-i#eg. g+*i & fr r4r ,fr& E #il

Sueeess and Sueeession BvFrankw.Tsao

. LaborandCompetitiveness r S c p n ar i n R rr i l d i n s

. Waste andQuality

r AsianandWestern Management . APECTraining Needs andDevelopment . CEOHubris

VOL.VIII,NO.4

InternetAddress:tam@aim.edu.ph

THEASIAN

MANAGER 1995 OCTOBER/NOVEMBER

COVDN STOBY

Training Trendsin Employer Sponsored

and Succession Success

andDevelooment in theAsiaPacific

by Frank Tsao Whetheryou're a taipanpassingthe reinsto your children, or iust a strugglingentrepreneur,Mr. FrankTsaospursyou on with words of wisdorntowardssuccess.

EtsuInaba,.uu 34 Region by Professor WhatAPECcorporations wantmostfromtheirhaining programs.

IUANAGEIUEI\TT IJPIIATDS

Forecasting theFuture

Kaizen by ProfessorReneT . Domingo, AtM There'smoneyto be foundin waste.

Marketing

by Professor FranciscoL. Roman,AtM A humorous,but timely, parableof a marketingmeetingin Hades. BUSIITIDSS NDVIDW

AcrosstheCulturalGap(PartII)

by Professor Mario AntonioG. Lopez,.etu Mayo Lopezconcludeshis article on the differencesbetween "Asian and Westerners. "

NXSXA"trCtr

HowRiskyarePhilippineIPOS?

by Professor Errol B. Perez,etu andProfessor AidaL. Velnsco Andhowmuchrewarddo thevvield?

&AIM THEAshN MANAGEn-A Publicatron of the Asid Istihrte of Mana8€hdr and the F€deration of Asian ltutitute ofManage ment Alumni Asiations. CopyriSht @ 1995 by T,'e ,4Ji," MrraSd. AII rights t!€4€d. Reproduction in any manner in whole or in pari in Entlish o. oth6 langlage prchibited. Tle Asian Manager is publish€d bi-monthly by the Asian Instituteof Management.Ediiorial and Advertising Offie: Asian Institute of Managemenl, EuEmio L6pez Foundation, Joseph R. McMid<ing Campue 123Pas d€ Roias, City of Makati, Philippinc. Tel: (632)892 40 1l-25; a92 (X 3543; 893 3 4r Fax (632) 817 92,t0. Photc graphi sourced by the AIM Library. Printed by Tim6 Printers Pte. Lrd., Sintapore The Asian MaMSq MITA (P) 245/9/91 KDN PP(s)r07613/93 ISSN 01167790

POI,ICY I'ORtrM by Professor FranciscoL. Roman,.ttu andHazelSanggalang Paintscenarios, not only sensitivities.

Traders or Entrepreneurs: Or WhyLaboris a Competitiveness 46 Issuein thePost-GATT World by SindhuKhullar,VisitingFeIIow Developmulti-skilledlevels of labor,not iustwhitecollar workers,to becompetitive. OPINION

Thinf AboutIt

Entrepreneur's Corner

uaM'74 byRobertV. Chandran, customers, Neverlosetouchwith yourkeystakeholders; suppliers, andemployees.

MDDLI OTIICDS

f,r!l.d!|tPamelaChoy,PacificAsiaMedi.,l3A,361 363 Ldkhart R@d, Wan.hai, HonE Kong. Fax, (85 2) 834 5980. reddy Tan, Pam Media Serices Pte. Ltd. 83A AlnlFFE E6t Coast Rdd, Tay Buan Guan shopping Centre, Singapore l5{2. Far. {65) 4408760.rrdoFiLt Raoa Slamer,Manaser, r irle Cotmuru(.tioB.. ll.Bdn8|.i \l A/5. ldlirtd 12t20. lndon*ia, Fa\ ro22l ' 7w20o0,7471784ltt l.yrl,ConnE Ng, AdvertisinS Repre*nlative, Mediaplus (M) Sn Bhd., 34A, Jalan SS20/10Danansara Kin, 47400Petaling Jaya, S€lanEo. Malaysia hdh SrHorrLdo Media South A3ja (P) Ltd., Apartmdt lA, Abhi-Anil Awas, KanhpathJamal, Kathmandu, Nepal. Telex 2606MEDREP NP, Fax, (97/

. OcroBER-NovEMBER 1995 THEAsrANMANAGER

uu byProfessor lesusG.Gallegos,lr., JessrecountstheAcermiracle.

Puln lcr FeliF B. Al{onso Co-I!$lrLor & Edlaor{n{hlef RicardoA. tn Allcho Prl|bh.t & Aave blrg lxr.3t r D€lia C. Gutiercz Millie C. Fener D||.cLrt Of.r.drr f ChlrLdo. tcdo I Hr.thr C.mlr.rt Flanm Patriarca INIf,trNAIIONIII, ITFf,fSf,]tITATIVD

.ra Prodrcalor Amy G. Espiritu ner..rct Alvcrdllnl A3.|3Lna VanessaM. ,aballas ReneT.Doningo,JesusC.Callegot Poblldhgf,ord lr., RicardoA. Um, Victors.Limlingan,EduardoA. Morat6, Ashok K. Nath 1) 227 3-%36. P.ldlatn S,l. 9lahudd in, chiel Exfturiv€, INs Communicario6 Lrd., 6/ F, Panoratu Centre, Fatim Jinnah Y.K. Rd.- Kararhi, Pakistan.Fax. (92 2l) 568 2271x.rer Chun, ri6t Media S€ri.€s Corpontio[ Ct! Bo\ 79] 9, Seool, Korea, Teld FMSCORP K 29132 Far. (02) 738 7970J.p!n Hid@ Natayama, Nakayama Media IntematioMl Inc., Fonte Aoyama705,2-22-14 MinamiAoyam,Minateku,Tokyo 102 Dr. Anthony Sham, Japan. Fa!. (03) 3479'6130.lli.lldd: MaMgintDire.ior,IlhiRep.Mtatjve Ltd.,867/58Pomtave Sukhumlit Soi l01, Prakahont Ban8kok 10260,Thailand. FAx, (66 2) 33r 9303.Unliea Ll.gloir Bnan Taplin Assiates, 32 Fishqy Rcd, Bo\m@r, Hemel Hempsl€ad,Hens HPl I ND, U.K. Fax (0142)2,16034 fn|ra Stephanede Ramust, MaMSing Di€tor, REM Inr€marioml., 24 bis ru€ Calli{i, (33 1) 39 89 63 41 95160 Montmorenca France. Far. ?

In theworldof communicotiol we'rehereto help. systems, ln 125 counlries worldwide, we ore helpingto provideodvoncedcommunicotions solutions. Thesesolutions, developedin close portnershipwith our customers,combine globol expertisewith locol understonding. Bosed on the lotest inlernotionol communicolions technologies,these ronge from ATM broodbond switching,Intelligent

Networks ond entire businesssystemslo INTELSATVll sotellite progrom ond lhe t h e s m o l l e s tm o b i l e p h o n e s . A n d f u r t h e rI A I 1 2 / 1 3 t r o n s o t l o n l fi icb e r o p t i cc o b l e .T o efficiencies ore ochieved through the d o t e , m o r e t h o n 1 0 0 m i l l i o nd i g i t o l p h o n e infegrotion linesore operotionolworldwide. of voice,doto ond video networks. The end-user is our first considerolion. As port of Alcotel Alsthom,we're here Everysolutionmustbe user-friendly, flexiblet o h e l p y o u . P l e o s et e l e p h o n e2 . 8 1 5 . O 2 . 2 7 , ond evolvewith individuolneeds. f o x 2 . 8 1 5 . 0 2 . 2 5 .o r w r i t e t o u s o l t h e Exomplesof our involvementincludethe followingoddress.Alcofel.We help you grow.

g oho, A h o t e lo h , L p pn e s 2 , / cM o v n P l o z oB u , l d i r g2 l 5 3 P o s o n T M o k o l , M e t r oM o n l o M o l i o l l l e r l o l o n o lA , p o r l 3 1 2 0 P h i l ' p pn e s

IM has receivediht' I 1995RamonMagsavsavA\rard tbr Intemational Understanding.Thc IlNl Arvard Foundation citccl A I M ' s i n n o v a t i v cc o n t r i b u tions over thc past 27 Yearsl tht original trvo-vearMBM Program/ a Proneer1n case eelucatiorrin Asia; the ont'vear M lvl program; CD\l t (onceknorvnasihe RDMI') for rural and gencral dcvelop n l e n t m a n a g e r s t; h e s h o r i DeVeloPment courseExecutiVe a n d of other Programs; a c h i c v c m e n i so: u r c a s er e scarch,our netl'ork of Alumnj ancl Rep office-sin the Paciiic t rtrtatct', B a s i n , T / r c , 4 s i n tM AIMLINK, and others. T h e c i t a t i o na l s o r e a d s : " . . . t h ci m p a c t o f A I M t r a n scendsnational bordcrs.Tcr date, sornlv t\r'cntv thousand i n c l i r , i d u a l sh a v e r e c e i v c ' c 1 morethanhalf AIM rraining... from dozensof neighbor " ing countries... These tlrentv thousand are fami l v l i k e v o u r s e l v e so, u r alumni. The AIM Familv extendsto our parentinstitutions,Ateneo and La Salle;our staff;our Boardof Cor,ernors,Trustees,and socialinvestors;our partner academicand corporate institutions;our guest lecturers from around the w o r l d ; t h e m e d i aj o u r AsianManagementAward n'inners;the list goes on and on. We thank vou all for contributingto this prestigiousaward, dubbed "Nobel prize" for bv the Asia. We could not have come this far u,ithout vour help; vou are winners as much asthe Instituteitself. O t h e r a u ' a r c l e e st h i s year include Co\'. Morihiko Hiramatsuof Oita I'refecture,Kvushu, Japan,for Government Sen'ices;Ms. Asma Jahangir,a lan'r'er from Pakistan,for I'ublic 6

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Service;Ho Ming Teh,IJead ofChiaviI'hilanthropvCroup o f T a i u ' a n ,f o r C o n t m u n i t v I'ramoedy.rAnLeaclership; anta Toer,a $'riter frot'nIncltlnesia,for Journalism,Litera turt',anclCreativcComnrunicationArts. The Ranon Magsavsav Awarcllvasestablishedbv the RockefellerFoundation,sottn afier the PhilippinePrt'sic l e n t ' sr l e a t h f r o m a p l a n e "percrashin March 1917,k) exampeluateIMagsavsa\"'s] plc of integritv anrl praEinatic idealisn rvitlrina denocratic societv" The a!\ ard is given to "inrlir,iduals and organizathe tionsn ho haveaddresscd problt'ms of povcrtv, malnutrition, dise.rse,ancl violenct', as rvell as \\'ith ne\\'er probItms that come i{ith prog r e s s . .r. e c o g n i z i n gI t h o s e l rvho har,cacldressediheseissucsl!ith exiraordinarv!igot integritv and selflcss n e s s . . . S i n c e 1 9 5 7t h i s honor has becn bestou'ed upon fifteen institutjons and 176 individuals. lVe arehulored to be inviteclas a membcr of this select 8r0up.

Aintd t ' MrigsrttTsntT AIM: 1995/{rirttort ntld.iug Itrtrt1totioml Uttdcrst'

Surfin'.{IDI Catchthewavc!Jointhe rvorld's .10million-anc1 still growirlg Internet users. AIM and Tht Asitn are norv onJine, Mnrrrrgcr specificallvin the \\brld Wide Web (WWW), the multimedia,user-friendlv portion of the Internet.It vou are now hooked into the net, load up vour \'Vinweb or Netscapeprogram and getAIM nerls and featureAsianManagerarticles onhttp://netserve.aim.edu, ph/. In tirne u'e rvill have stuclelt r6sumâ&#x201A;Źs,job op poriunities,joint Yentures ancljob offersfron aJumni, and lnanv other rL'sources online. Youcanaisot'mail

1995. TI{EAsr,\\ MA\ACFR OC I(]BER-NOYF\IBER

D E C T . T h e n e w w a v e i n o e r s o n a lc o m m u n i c a t i o n s .

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us your commentsand just within the first day.Try it, you aboutany newsto aimnet@ will love it. You will in fact aim.edu.ph,or tam@aim.edu. whine to us later:"Why didn't you tell us about this before?" ph. If that'snot enoughyou canalsoretrievethemagazine AIM's Annual Manageby subscribingto the Asian ment Confe|.,ence lntelligence Wire(AIW)servAIM rvill be holding its ice.AIW hasmorethan200 annual managementconferAsian businessperiodicals enceon "Asian Crowth I'olyFora minimal gons"on 12to 13March1996, and factbooks. fee you can downloadthe at the Shangri-La Hotel in magazine in electronic format. Manila.Our scheduledguest T h i s s e r v i c ei s a v a i l a b l e is Dr. Kenichi Ohmae, curthroughmostlocalEuropean rently managingDirectorof Chambers of Commerce. the Heisei IlesearchInstitute If you haven'tdoneit by in Tokyo,Japan.A nuclearennow we urgeyou to join the gineer bv training (he was a net.It is soeasy,it seemssilly. s e n i o r d e s i g n e n g i n e e rf o r Werecommend you geta 486 Monju, Japan'sprototype nuPC and a modem. Desktop clear reactor),he made the packages thesedayswill cost switch into thebusinessworld no morethan $ 2,000,and a with great impact.A former laptoppackage(with color) managing partner of McKinwill costslightlymore. Then sey & Company,Dr. Ohmae call any one of the numbers made his mark as a worldbelowin your homecity.The renowed consultantand aucostto registershouldbe less thor on creativestrategies.His than $100,with reasonable f a m o u s b o o k s i n c l u d e l l c monthly fees.In return you Minri oi tha Sfrnfcgist,Trind cangetimmediateprofit:You Poruer, BeyondNntionslBorders, can cut down your fax costs The Borritrlrs World,and Thc dramaticallyby simplyusing Endof th( NatiotlStof., and he t h e e - m a i l n e t w o r k ; t h e wrote frequentlv for the Haramountof freeinformation vard BusinessReview. Ohaloneon the WWW portion mae's strategicframeworks cangeneratetremendous op- were unusual in the eighties: potunitiesfor your business; he cerebrallyblended the orlastbut not least,think about derly, svstematicframeworks themanyhoursof satisfaction of the Westwith eclecticismof in "surfin"theweb:Bangkok: the East. In Thc Mird of the InternetKnowledgeCenter, S t r a t e & i s(t1 9 8 2 )h i s c h a r t s 719-1583; Bombay: GEIS,202- were a marvel for economy, 3075;Hong Kong:HK lnter- with well-defineddimensions net, 527-7777; Hong Kong t h a t a n y b u s i n e s s p e r s o n Supernet,358-7924; Internet would understand; his viOnlineHK, 768-8008; Jakarta: gnetteson soda pop and miIndoInternet,470-2889; Kuala crowave ovens and superLumpur: Jaring,254-9601; tankerswereequallyrobust;at M a n i l a :P h i l n e t ,6 3 3 - 1 9 5 6 ; the same time, some of his Seoul:Databank,751-5034; strategies-"Win the World" Singapore: SingNet,838-2723 ; -actually exhortedthe reader 733-6454. Taipei:Seednet, to make bold, quantum leaps All thesenetproviderscan into the unknown. Ohmae give you technicalassistance was ableto bridge the eastand as part of their service.Most the west nicely. of thesoftware available today To my mind his mostinterare user-friendlyand usable esting story on the creative 8

usesof strategywas outlined in a Harvard BusinessReview article. It was the experience of Yamaha,particularlywith their piano division. Yamaha was facingdecliningsalesin for its pricey, elegant grand pianos. It was a product that lastedmore than h\.entyyears, and buyerswere not apt to replace their machines,much lessbuy anothergrand piano. What to do? Yamahac.ngineers experimentedwith a new devicein the eighties:the CD-ROM. Much like the old Hollywood cowboy films where upright pianos played themselves-rvith the help of punched rollecl music-Yamaha engineersadopted CD"play" ROM technologvb the piano for their owners,bv supplying an attachmentto the piano. Ilesult? For the price of attachment,which costsa f e w t h o u s a n dd o l l a r s ,y o u

Thereare many ways to squeeze more out of a mature product or a servrce. could haveVladmir Horowitz, or Van Cliburn playing the piano ght in your living room. This was much more pleasingthan turning on vour stereo,and much cheaperthan hiring the real Horowitz. Yamahaeffectivelyextendedthe product life cycle (PLC)of the grand piano, bv offering Yamaha piano owners the chanceto continueusingtheir machine,long after their kids havegraduatedfrom their lessons. Yamahaalso found a

way to extend profitability, long affer the salesand marketing peoplethought the productaswaning. Ohmae'slessonsare clear: there are many ways to squeezemore out ot a mature product or service. Acer,for example,as outlinedby Dean hassqueezeddeJessCallegos, livery time and churned out more inventoryturnson its PC products as if thcy were iastfooclhamburgers.It seems, accordingto Jess,to be a simple matter of how you view your business. Merrill Lynch viewed itselfnot just asa stock brokerage,but as a complete financial servicesprovider of debitcards,checkingaccounts, and consumer credit,with its famedCashManagementAccount (CMA) product. Ohmae'slater books also presageour conference:gowth polygons.Thesub-bading"tri"squares" partnerangles"and ships are sproutingup all over-in China (Hong Kong, Cuandong,Tain'an,and Fujian), in lndochina (Vietnam, Northern Malaysia,and Thailand),aroundSingapore(Johor and ldau)and in EAGA,for the southernpart of ASEAN (Brunei, Indonesia,Malaysia,and thc Philippincs). Will thesesubtrading regionsprosperat the sametime asAFIAand APEC and WTO? We hope to find answels to this question.Please comcin March! Price lnei'ease TheAsinn Managtrwill be changing its ncwstand price beginning in December-January. This change will help cover the increasingcostsin printing and distribution, as well as help expand our researchand pro-bonocapabilities. Your contribution is greatly appreciated. Pnt RtckuA. LDtrtrad]tsllT a,tdMntl alrnr.]tlCo,nnu iralbfi iJr tll. EDPnt l

1995. THEAsrANMANACER OcroBER-NovEMBER

!1'

BY FRANKW.K. TSAO

Success andSuccession Lessons fromtheChinese CulturalTradition

l'ounding rlnd Maraging an Enlerprisâ&#x201A;Ź The vear rvas 1950.The place r'r.as H o n g K o n g . I r v a sn c n a r r i v a l f r o m Shanghaiin searchof a futurein an unfamiliar land. Walkingwith a fanilv elder dllnts thr pier' that dt'ttrrl Honp,Kong, harbout I spotteda ship about3,000bns $'aiting its turn to load. "Wouldn't it be great if I wcrc thc owner of this magnifi centship!" I saidrvith envv and resignation. My elder,Iooking intently at mâ&#x201A;Ź.,replied in challenge,"Rememberthe prorerb,'One'saspirarionsshouldertend to t h ef o u r . e a st:e nt h o u . a n dm r l c . , r w a vi . just like next door.'Youmust have a ar strttr of lvhere vou want to lead vour enterprise.Then,'Wherethereis a will, there is a wav' If you have the (,i// to fulfill that goal, one dav vou z{'il/ou,n such a ship." That conversationhas remained vividly in mv mind to this dav Acccpting thc challc'ngefrom mv elder,I soughtguidancefrom a successful family friend on hot'to work torvard mv goal. Hc advised me, "Whatever vou do, be guided by theseeight charactcrs-

)il Edl;'

enterpriselocatedaway from vour home "On base. enteringa country,a'l vrhat is Educatron.Knowledge. Understand- not allowed; on entering a home,ask for ing. That is Ren. Educateyourself.Be the namesof familymembers." In the late knowledgeable about the technicaland 1940sa number of leading businessmen professionalexpertisevou need to manfrom Shanghaiwith ample capitaland age vour business.Understand your en- know-how cameto Hong Kong to launch \ i r o n m c n la n d d i r e c t i o nT. h i s i s e s p e - new ventures. They failed preciselybeciallv important when you conduct an causethey ignored this lesson. Be realisticin vour assessmentof the hidden valleys and sharp as you pursue your goal. "lf you don't know the obstaclt : anddang,crs preenled bv mounlain: a n d f o r e s t s .s h a r p c J i f f ' a n d g o r g , e s . swampsand marshesalong vour chosen route, vou cannot advanceyour troops." Understandthe needsof your customers. Understand your employees-their charactetneedsand aspirations.And, most importantly, r derstnndyourself.Remember Sun Tzu's farnousdictum, "Understandyourself. Understand the other party.Then you will succeedevery time."

Rin

R c n{ e & , r R e n r 3 . I \ r n r . l k ,

j . ( c nr ^ - ) s h i n r , l i ) ( h c n g r l l ! - l Qin ( 4/ ) and Jidn( ,(&.) Theseare the most mcmorablccight charactersI have ever learned. . OcrolrER'No!EMBFR TIIEAslA\ MANACtTR 1995

\\Jl Rdn Patience.Commitment.That is the essenceofRdn.Therearemany Chinesesayings to illushate the practicalapplication of Ildn. "Lack of patiencewill disrupt the "Where perseverance best-madeplans." and commitment are resolutelyapplied,

evenmetal and rock canbe broken I followed the good adviceof my family friend. I searchedfor experiencedprofessionalsin shipping.I studied shipping iournalsand reporti on shippinSorgdnizations.I familiarizedmyself with freight marketsand visitedprospectiveshippers. I boardedships,going from engineroom to deck and talked to anyone on board willing to sharetheir knowledge and experience with me. After manv months of leg work and brain work,l bought my first ship that was within mv financial resources.It was a ship built in 1918,not a pretb/ sight in the evesof the impatient inspector.He was obviously displeased with the task he was to perform. He was affogant.l decidedtobe patientwith him. But I was determined to speakup when his demandswere outrageous-not in anger but with reason.The ship was retrofitted within budgetand placedin service on schedule.That was the first ship t h a t l a u n c h e dm y s h i p p i n ge n t e r p r i . e . later to be knorvn as lnternational Maritime Carriers. Another lessonof Rdn ( *{, ) and Ren ( .{. ). In the late 1960sMr Robert Kuok Hock Nien and I undertook the task of setting up the first national MaJaysia n :hipping line-the Malavsian I n t e r n a t i o n a lS h i p p i n g C o r p o r a t i o n (MISC).Mr. Kuok and I called on the chairmanof a Bristishshipping company which, at that time, monopolized all the shipping lanesin Malaysia.Weexplained to him whv MISC had to place at least two ships to seruethe market in order to make our enterpriseviable and askedfor his cooperation.{fter two hour: of dircussion,he told us that he would a//ul MISC to run orrenlld 0 i1idr. ship in the market. lf we insisted on placing two ships in service,he would run MISC to the ground. He stood up, pointed to the door, and ordered us to leave.We left his office.determinedthat we would persevere. We would compete head on againstthis monopoly.We tighteneciour b u s i n e s sp l a n s a n d o p e r a t i o n s .W e strengthenedour resourccs.We marketed more intensively.In 1992,MISC celebratedits twentieth year of successul operation and won the honour of being one of the most profitable shipping companies in the Asian region. That monopoly? It had long gone out of existence. 10

mount to having no respectfor yourself." When you have high regard for yourself, Capital.Carefulhusbanding of re- you will not hesitateto accepthonestadsources. That is Yin ( JL ). Thereis the vice and criticism even though as the Chineseproverb,"Withoutcarefulman- Chinesesayinggoes,"Honest criticism agementof resources, a surpluswill be grateson the ear Cood medicineis brtter exhausted. With carefulmanagement, to the mouth." When you respectyour evenmodestresources will yield a sur- employees,you make them feel valued. plus." Youcanexpectand theywilldeliver qualMv yearsin the shippingbusiness ity performance.When you respectyour havetaughtme how invaluableYin has customers,you will deliverquali$ goods proventobe.Therewasalongestablished and service. Norwegianshippingempirewhich, at the On managinghuman resources,lfind heightof thefreightmarketin the 1970s, the proverb, "Apply talent where it can embarkedon a vast fleet expansionfi- be best utilized" most instructive. You nancedby highly leveraged debt.When place an employee where his or her thefreightmarketcollapseda few years strengthscan be most appropdately utilized and you supplement what is lacking in that person. Moreover,talent, which is indispensibleto the growth of an enterpdse,must be nurtured and cultivated.That demandspatienceand commitment for the long term. There is the Chinesesaving,"lt takesten yearsto cultivate a tree, a hundred yeals to grow a person." On nurturing and cultivating human tesources,I recall that in the late 1950s,the MalaysianGovernmentoffered "pioneer" statusfor industries that were new to the country. At that time there were very few trained professionalsand erperiencedmill worler. in te\tiles in Malaysia.The investor group who founded the first major textilemill had to begin from thebeginning theyrecruited seasonedprofessionals,technicians,and old mill hands from Hong Kong to work in their Malaysianplant. To cultivate and nurture local talent,they organizedtraning programs for newcomers.Today, later, so did the company.We find simimany of the leading professionalsand lar examplesin the reailestateindustry. technicale\pert\ in the te\tile sectorin The decline of the famed Olympia and Ma)avsiaareproudalumnrof thotetrainYork empire is another reminder of the lng programs. lessonof Yin-that capital and resources t i must be carefully budgeted and pru\ f{ dently managed. Shin Prudence.Critical thinking. Careful and realiltic planning.This is Shen.There R6n are numerou5quotationsfrom classical People.Humanresources. How to Chineseliterature on the importance of work rvith people.How to managehu- Shen,both in the conductofbusinessand manresources. Thatis Râ&#x201A;Źn( A ). R6n personallife: "You "Broaden is basedon theprincipleof respecf: vour Inowledge.Examine musthavehigh regardfor yourselfthen thoroughly. Thinl critically. Analyzelogiotherswill regardyou highlv Youmust cally. Executeprudently and with perserespect vourself,thenothersrespectyou." verance. "Remind If you do not respectothers,it is tantayourself ofdanget then you

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will securesafety.Bepreparedfor retreat, whotookoverfromtheirbuilder-fathers. cernourselveswith providingopporhrthen you will be readyto advance.Be Morelikely born into wealthandcomfort nitiesas well as safetynetsfor our emwary of chaos,then you will secureor- and never been bruised by the hard- ployees. Thatmeansduringrecession we der. Bevigilant againstfailure, then you knocksexperiences the founderhad to mustdo our utmostnotto abandonthem. will survive." endure,the secondgenerationis particu- Rehainand educatethem to meetnew "Plan first, then take action, and you larly rrrlnerable to flattery impatience, skill demands.With our clientsandcuswill succeed. Act first,thenplan,andyou and hasty,undeliberated action.As the tomers,we must "Promisewhat we cllr "Prosper will fail." Chinesesayinggoes, through perform.Performwhat we do promise." Think critically threetimesbeforeyou hardshipbut wither in comfort and If we don't , we will be delinquentin act." luxury. " ThomasWatson,the founderof meetingour communalresponsibilities. "Be consistently prudent as toward IBM, usedto post the word "THINK" in Toour profession andour enterprise, we theendasyou wereat thebeginning,and every officeand by every deskthrough- mustseruewith loyaltyandcommitment you will not encounter disaster" out his organization. I would proposeto because thecredibilityof our profession "Forsakeprudence and planningat thenewgeneration of heirsthattheypost andour enterpdseis at stake. thebeginning,and all the regretslater on thecharacter"SHEN" on their desksand The practiceof Ch6ngis well illuswill not rehieve your failure." by theirbedsideto serveasa constantre- tratedin Chinese proverbs. A fewquoted "Do not pay attentionto words that minderoftheimportance of Sh€nin their here: "lntegrity demands are unsubstantiated. Do not undertake endeavorto build theirown empires. that you don't plansthatareundeliberated." harmothersin order to benefityourself." "Prudenceis the )-.+) "Don't do to charrnthat will prootherswhat you don't 7'tectyou." l,heng \ want othersdo to you." "You only Theturbulentwatersof the shipping In the €thosof the Chinesecultural cheatyourselfwhen you businesshavebeenlitteredwith trasic tradition,individualsand their commu- cheatothers." "Treatyour employees business disaters. A numberof thesed]s- nity arebound togetherby a web of muthe way you asterscanbe tracedto onesimplefacttual obligaiions and responsibilities. The want yourselfto be heated.Neverbe remanagement'srecklessdisregard for tradition stressesihe responsibilitiesof luctanttoconectyourown shortcomings. Shen.In thelasttwenty-fiveyears,we saw theindividualto hisor hercommunity- But alwaysbe magnanimous and commanyinstances wherefle€toperators, fo- family,clan,profession, businessassoci- passionate towardothers." cusingon theimmediateboomingtanker atesor otherbroad-based entities-rather market,gambledon acquiringVLCCs thanthe nglls of the individual.Ch6ng (verylargecrudecarriers)at US$25M a is anextensionof thishumanistic tradihon. Qin piece.Barely three yearslater, demand Ch6ngis cenhal to our cherishedmoral Diligence.Perseverance. Thatis Qin. for WCCs collapsed. Thesevessels, built values:interpersonal responsibiliryloy- Thereis a Chinesefable-Y( Gdng Yi only to servea very specificsegmentof alry sincerirypersonalintegrityandcom- ShanI ir,L, ) thatillustrateithe b the oil market,did not havethe flexibil- mitment.Our credibilityand reputation very spiritof Qin: ity to carryothercommodities.Many had are measuredby how faithfully we live Onceupon a time,therewasa ninetyto be sold for merescrapvalueof $ 5 to up to thesevalues. yearold manwho lived in a house surIn practice,living up to Ch€ngde- roundedby two hills. He had to travel $6M . But other operatorssurvivedproIongeddepressionin freight marketsand mandsthatwe,asemployers, mustcon- manyruggedpathsandwindingwaysto lived to enjoyanotherprofitablecycle. reachthevillagebeyond.Oneday hebeTheymanaged theiroperations in accordance ganwork to levelthehill. His neighbors with Shin.They structuredtheir fleet for laughedat him. They said,"Stopwhat flexibility and functionalityand added youaredoing,old man!"Theold manrecapacityata steadyandsustainable pace. plied," After I die,my sonwill continue. Theirdebtloadwaslimited to what could His grandsonwill continueafterhis son be easilyfinancedwith conservatively and so generationaftergenerationthey projectedcashflow. Above all, by pracwill persevere at levelingthe hills.One ticing Shdnover a long businesshorizon, day,thehills ruillbeleveled." theymanagedto minimizerisk,optimize I like to citea real-worldexampleof gain,andbuild a solid future for their enhow the practiceof Qin helpedto turn terprises. aroundan enterprisesufferingfrom deFor the youngergeneration-especliningsalesandmountinginventories. cially those who want to distinguish Thirty yearsago,a newlyestablished themselves not asmerecustodiansof their Malaysiantextilemill foundits salesfallinhe tancebut asbuilderslike their foreing far shortof projections.Finishedprodfathers-it is importantthattheypayspeuctswerepillingup in warehouses. It was cialattentionto Shdn.Theannalsofbusilosins marketshare.The livelihood of nessarefull of failurestoriesof rich heirs hundredsof workersdependedon the

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1.2

OCTOBER-NOVEMEER 1995. THEASIANMANAGER

company'ssuccest which appearedto be further and further remote.Also at stakeweremillionsof dolla$ of invesiors' capiialandthecredibilityof management. Managementwas determinedthat wayszasl be found to turn aroundthe business.Executivespersonallyled sales representatives deepinto field marketing throughoutMalaysia.For days and weeks,ladenedwith heavyloadsof sample fabric,theycalledon everyoutlet,not just in citiesand urban centers,but also in outlying towns and villages.Theydid not stop at sellingfabric.They invited and salesclerk to critique storekeepers their productsand offer suggestionsfor new colors and designs.The field marketingeffortsweredifficult andchallenging. But,asthe sayinggoes,"Onecannot imaginethe expanseof spacewithout climbing high mountainsnor be able to fathomthedepthof earthwithoutgoing to the deepestgorges,"Management's diligent effortsdid yield (1)reasonswhy their existingline of fabric was not selling (2) what innovative ideaswere neededto correctwhat did not work and (3)suggestions for newcolorsanddesigns that offeredgoodpotential for consumer Basedon thesehard-earned acceptance. lessons,managementcreatednew designs,overhauledproductionlineandimplementeda more focusedmarketing shategy.With thehelpof a motivatedstaff andsteadfastpursuitof "fuality andperfectionthrough diligence,"management not only hrrnedaroundthecompanybut alsolaid a solid foundationfor profitable growth in later years.

nin /a virhrein the Iian is thrift-a celebrated Chinesecultural tradition. In the annals of ethnic Chinesepioneerswho made good in their adoptivelands,mostif not all of them left their homevillageswith nothing but their skills and a will to succeed.Trueto their upbringing,theyfaithfully practicedJian.They lived by the motto,"Saveandmeasureyour daily expensesagainstyour eamings." Many in their lifetime amassedpersonalforhrnes while their savingsandinvestmentscontributed significantlyto the wealth of their communitiesand their adoptive lands. In business,thrift demandstight con-

tainly havesomethingto ieachme." By constantlysubjectingoneselfto this kind of reality-checkinsteadof isolatinghimself [herself]in penthouseofficesuites,a leaderwill neverlosetouchwith realpeo ple---employees, customers,andthepublic. The goodlearner"amendshis [her] own shortcomingswith the shengthsof others."Zhi demandsthat a leader should understandthat, "As the world aroundus changeseveryday,we must renew ourselveseveryday."To lead, he [she]must be open to new ideas,new technology,and new hends.This is particularly irnportant for us ethnicChinese entrepreneurs.Our enterpriseare, more oftenthannot,borderles sandtrnnsnational. W e haveto competelocallyandglobally. Hard- won marketsfor our goodsand servicescan disappearin a matter of monthsor evenweeks.But, new opportrol over expenses.Thrift mandateseffi- hrnitiescanbe within our graspif we are cient operations.Thrift requirescareful evervigilant in spottingnew trendsand husbandingof resources.Responsible in beingopento innovativeideas. In managingour organizations, Zhi managementhas to be preparedfor unrecruit delegate retwisis turns in the market demands that we and expected and who azd place.In a recession,it is the ability to sponsibilityto those arecapable Otherwise,we comeuo with the lasfhundredthousand of soundmonl character. "yes or the lnslmillion dollarsto clearup bills will besurroundedby unproductive anddebtthatseparates thesurvivorfrom men."A specialword of cautionto our ihe bankrupt.Thekey to prospe ty is the heirs and young empire-builders-be your assocapacityto survive the next downturn. wary of "yesmen!"Challenge The managementthat implementsthrift ciatesto criticize your policiesand offer with vigor will alwayshavethat key in constructivealternatives.Theseconstructheirhands. tive criticismsmayhurt your egobut ihey will saveyou from many heartachesand l,eadershlp regretsdown theroad. Wemust havethe wisdom to actonly The successof an enterpriseis attributablelargelyto thecalibreof leadership. after deliberatethought. It has beenmy Volumeshavebeenwritten on how to be experiencethatachontakenin hastewiththe very best and most effectiveleader. out deliberatethoughtis doomedto fail. To rne, five simple charactersrooted in In thefollowing paragraphs,I would like Chineseculturalhadition havetaughtme to sharewith readersother quotations what I needto know most aboutleader- frorn classicalChinesethat havebeenesship. Theyare: Zhi -trf (wisdom), peciallyhelpfulto me asI movedup the ladderovertheyears: Xin;$ (credibility),R6n ,(e. (com- leadership 'The challengeis not in iaking good passion,interpersonal responsibility), VongQ (courage), anafr Yan measureof othersbut in taking honest (discipline). measureof yourself." " Whenyou understandtheotherperson,you are wise.When you honestly understandyourself,you are truly enlightened." "Be awareof your own weaknesses The wisdom to takean honestmeasure of one'sown abilitiesand limits of but neverbelittletheshengthof others." "Seemore,you broadenyour perspecone'sknowledgeand expertiseis Zhi. As "When I am walkingin tive. Listen more, you deepenyour Confuciussaid, a companvof three,oneof themwill cer- knowledge."

zhi

. OcroBER-NovEMBER 1995 THEAsrANMANAGER

"Whatjoy it mustbe pe$evere to in learningand in practicingwhat you learn."

mitmentto inferpelsonal responsibility is well appreciated amongtheenlightened in the westernworld. Thefamedeconr> mist and presidentof the Universityof ChicagoDr. Hugo F Sonnenschein said recently,',Asasociety, wecarnotbeguided by what is economicallyefficient.Todo so wouldbeto denyour humanity." Guidedby R6n,a genuineleaderleads with sincerityof intent and exemplary performance. His [her]interpersonal responsibilitiesextendto associates, employees,customers, andhis [her]profession as well as the communityat large. Rdndemands that"onemustnotconsider whatbenefitsoneselfasbenefit;onemust stdvefor benefitsthatwill benefitahunder theheaven."Thentheleaderwill inspiretheloyaltyandtrustof otherswhich is indispensable to effective leadership.

officeequipment-madeby Xeroxand others-hasrevolutionized communication.Wecannotimagine an office running its operationsany'lvherein theworld Xin At without thismachine.In fact,Xeroxhas Xin is credibility.Credibilityis priceevolvedinto a new word in the English less.In the ethnicChinesecommunify, vocabulary-to "xerox" is "to copy." ones reputationdoesnot reston thesize Along theway,XeroxCorporationgrew of his lherlbankaccount. Reputation is from an obscurephotographicsupply measuredby one'scredibility.A leader companyin RochestetNew York,to a mustfirst "establishhis [her]credibility multi-billiondollar and multinational undertheheaven."Toestablish credibilgiantcorporation. ity, onemusteam the trust of othersby In 1938ChesterCarlsonappliedthe "Promiseandperformance deed. mustbe technologyof xerographyto transferan oneandthesame,"decrees oneChinese imageon to a pieceof paperH e offered proverb. his inventionto severalleadingcorporaXin demands erezplary conductofthe tions.Everywhere hewenthewastumed leaderAs a generalmustearflthetrustof down. One majorreasonthat Carlson's his troopsbeforehe canleadthemeffecinventionfailedto gainsupportwasthe tivelyto battle,onemusteamthetrustof generallyacceptedwisdomthatit wastirhis[her]associates andemployees to lead thinkablecompanieswould spend thouthemeffectively in his Jherlenterprise. sandsof dollarsfor a pieceof equipment "Whenon top,guard againstarogance," Y6ng just to replacethe penny-a-piece carbon for an unpretentious leaderwill reapthe Y6ngiscourage. Tothinktheunthink- paperl benefitof genuinerespectand coopera- ableandto acton suchthinkingis )6ng. Undauntedby hisfailureto gainsuption from his [her] people."One must "Breakdown outdatedthinkingin order port, Carlsonpersistedin his search. preparefor adversitybut wait to partake to bring in new thought,"represents the EvenhrallyCarlson'sinventioncameto in prosperityonly afterthe world has spiritof Ydng.Tobegina newbeginning the attentionof Wilson,who had inhertastedprosperity.A lead.erthus engaged aftersufferingadversityis \6ng. Thecriti- ited from his fathera photographic supwillbuild a shongandloyalorganization. ply of companyin RochestelNew York. I mustaddthatthespectacle of top manWilsonhiredthebestlegalmindsto adagementindulgingthemselves in luxunvise him on the perfectionof Carlson's oussurroundings andmulti-milliondolpatent.He consultedthe bestscientific lar paychecks andbonuses whileclosing expertson irnaging.Wilsontook full plantsand layingoff workersis a gross measure of marketingriskby seekingthe violationof Xin. mostinnovativesalesideasandstrategies On credibility,aword of cautionto our he coulduncoverThatled to a marketheirsand empire-buildersto-be. It has ing strategythat was unheardof at the beenmy observation overthe yearsthat time-leasingthe machinebasedon uswe mustguard ourselvesagainstbankage.Justa few penniesa copy.No differerswho do not shareour traditionalreentfrompayingfor carbonpaper!In 1960 spectfor Xin.Theyareonly interested in the first Xeroxmachinewas broughtto the shortterm and in whatevertransacmarket.Therestis history tionfeestheycancollectfroma deal.They ChesterCarlsonbegana new beginwill lavishyouwith easycreditwhenyou ningeverytimehe metadversity. Joseph havelittle needfor it. But they will exC. Wilsondared to think the unthinkploit everyloopholeto legitimizeunilatable-a massivemachineto replacethe eralterminationof creditjust whenyou lowly carbonpaper.He took full measneedit. Don't ba,k on their "commit- cal elementunderlyingall thesedefini- ureof thbdanger-themodestresources ment"or you will live to regretit! tions of \bng is this Taket' l measure of of the companyhe had inheritedcould danger ondrisk.Take decisioe nctiont0 meet beexhausted beforethemachinecamero tr6n A? thechnllenge. Without this element,all market-and the riskof potentialchdlTheheartandsoulof thehumanistic degenerates to recklessness. Iengesto Carlson'spatent.As a Chinese character of theChinese cultural trddiWe find a goodexampleof )tng in sayinggoes,"Every a thousandconsidtion is bestrepresented by theword R6n. successful leadership in ChesterCarlson erationsof a sagemayyet missa point." R6nis composed of two ( : )humanbe- and JosephC, Wilson of what is now He facedcompetition from long estabings( /r. ). R6nstresses compassionate knowntheXeroxCorporation, manufac- lishedcompaniesbacked by strongfinanconcern for one'sfellowbeings.Thiscom- turer of the Xeroxcopier This pieceof cialandmarketingresources. In theend,

OcroBER-NovEMBER 1995. THEASIANMANAGER

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he took well-calculated risks and decisive action.Two short Chineseproverbssum up very well the Ybngin Carlsonand Wilson: "Fully cognizantof the dangeryet undaunted-thatis l5ng." "lf you don't venhrreinto a tigress' den,how canyou get her cub?"

Ydn

Yi{n is discipline."lf thereis no ruler nor compass,you cannot form squares or circles."In the Chinesecultural hadition, disciplinestartsat thetop.Therers no room for the leaderto eatrice while asking others to subsiston chaff. Here are severalreminderson Yin from classical Chineseliterature. "Leadby your own example." "Correctyour faults if any; reduce your effortsif therearenone." "Discipline and cultivate yourself, then you can keeporder in your house; discipline and secureyour nation, then you can bring peaceto all under the heaven." Wemay recallthat durhg a periodin the late 1960s.Hong Kong experienced greattumoil punctuatedby daily actsof violencein the strcets.As the headof my family,I had responsibilityfor the safety of my aging parents,my wife, and my young children.As the headof my compary, I had theobligationto offermy staff and their immediatefamiliessomeways to copeuhth the crisis.Someadvisedme to takerefugeelsewhere, someadvisedme to stayand wait for the stormblow over. Toluae or to stay?BeforeI mademy decision,I soughtout the bestinformed mindson HongKongandneighboringregion for their objectiveassessment of the disturbancesthat wereso threateninsto HongKongresidents. Withcarefuldeliberation,I cameto the conclusionthat thoseactsof violencewere randornand local.I decidedto stay. But what if rny analysisand conclusionwerewrong?I mustpreparefor a fall back positionshouldviolencein Hong Kong persist. Iirsl I persuadedmy parentsto leave Hong Kong. Then I explainedmy decisionto my key staffrnembers.Thosewho plannedto takerefugeelsewherewould be offeredsomemeansto do so. Thosewho decidedto stay would be 16

providedwith thesameescapâ&#x201A;Źroutethat my farnily and I would take in casemy bestjudgmenttumedoui to bemistaken. We put in placeour escaperoute:Two smallboatsanchoredin Hong Kong harbour and a largervesselwaited in the openseanearHongKong.Theshipswere fully staffedand well-stockedwith provisions.I remiftedabroadsufficientfunds asa rainy-dayreservefor ny family,staff, and ihefuimmediatefamilies.Thus prepared,we carriedon our daily livesin as normal a fashion as possibleunder the ratherchaoticcircumstances. Gradually,stabilityandcalmrehrrned to Hong Kong.Thecalculatedrisk I took in deciding to stay proved to be conect. Butreachingthatdecisionandhavingthe disciplineto stay the coursewere not without fear or pain. l{hat gaveme the shengthto managethecrisiswerethefive simple charactersrooted in the Chinese cultural tradition-Zhi (wisdom),Xin (credibility) R6n (compassior!interpersonalresponsibility),)6ng (courage),and Yrin(discipline). 0n Suceecelul Suacesslon Succession is difficult. Accordingto a recentsuwev "Farnilv conholled enrer-

prisesaccountfor one-thirdof all companiesin theFortune500,anythingbetween 75 percentand 99 percentof all companiesin theEC...amere17percentof startups surviveinto the third generation."In anotherreport "Only 3 out of 10 such [family] businessessurvive into the secondgenerationandonly oneoui of 10into

thethird." Still, it is a universaldesireof founders to passcontrol of their businesses along family lines. How do we prepare ourselvesand our heirs for a successful succesion?Thatis acomplexquestionfor which we do not have easyanswers. However,we can draw on the Chmese cultural tradition for lessonsto guide us foalardsuccessfulsuccession. First, preparingfor succession is a Iong-termcommitment.Thefounderhas to commit time and enengy to prepare and to nurhrre his [her] heir for succession.Thepreparationshould begin with cultivating the heir apparent'sinterestin the businessat an early ageand to provide opportunities for him [her] to ob serveboth the successfuland the unsuccessfulendeavorsof the founder In this way, the heir apparentwill leam to understandandappreciatewhat theChinese sayingdescribesas,'The pain and hardship of founding an enterprise." Second,theheir apparentwill benefit from working for other firms for a few yearsbeforejoining thefamily enterprise. In theoutsideworld, he [she]will besubjectedto "ruler and compass"and some hard knocksalongtheway.As thesaying goes,"One must experiencethe hardest of hardshipsin orderto climbhigherthan the high." In the process,the prospechve heir will leamtheperilsof anoganceand persmuance, lhe valueof pntience, andmodestyabouthis[her]uun knmoledge andexw$e. Third, afterthe heir apparentjoins the family firm, he [she] shouldbegin at a low level and gradually work his [her] way up the ladderin the organization. That will afford him [her] the opportunity to learnihe businessfrom theground up and to be acquaintedwith staff at all levels.He [she] must work to gain the respectandloyalty of theotheremployee so that he [she]canleadthem effectively in the fuhrre. Thefounderhasto makesurethat the heir apparenteanrshis [her] promotions to greaterresponsibility in the firrn. To preparethe heir apparentfor the role of the chief executiveofficer, the founder will be wise to delegaieresponsibilityto him [her] graduallyand only onesection or onedivision at a time.Allow him [her] roornto makemistakesbut makesurethat he [she]Ieans from his [her] mistakes

,1995. OCIoBER-NoVn,BER THEASIANMANAGER

"Failureisthemotherof success." It is far lessdamagingto the enterpdsethat the heirapparentmakesmistakes andlearns from thembqforehe [she]takesovera top position. management Thefoundermustmakeit very clear to the heir apparentthat unlesshe [she] has a proven rccordoI exemplarypetformanceovera long period of time , he [she]cannotlook forwardto takingover the enterpdse. Thiswill be difficult and oainfulfor thefounderto do butit is necessaryin order to protectand preservea viableenterprise. Weunderstand thatthe of the enterprise is crucialto the success foundingfamily.But we mustnot forget thatsuccess of theenterprise is alsocritical to hundredsand thousandsof employees,providers,and their families whoseeconomicwell beingdependson theenterprise. Fourth,the founderandtheyounger generation havetosharearomnorvision. If theformerwantsto focuson shipping whilethelatterinsiststhattelecommunication is fftefuture, the disagreement couldcausesuchtensionin their relationsucship asto work againsta successful cessiondown the road.The prospective heir should have the wisdom to learn from the invaluable experiencesof the founderin planningfor newinitiativesfor the enterpdse.In managingthe enterprise,he [she]will bewell advisedto follow the Chinesesaflng, "lt is sufficient to eatthewaya silkwormfeedsitself,not the way a whaleswallowsits prey;pro ceedsteadilybui everforward,thenprospedty for Benerationsto comewill be assured." Fifth, where thereis conJlict,resolution hasto be based. on mfiual rcspect, The founder has to allow openand ensy dialoguewith his [her] prospectiveheir The latter has to have lhe patierce and thewisdom to takean honestmeasureof the limits of his [her] expertise.In this way, compromisescan be rnoreeasily reached. Sixth, when the heir apprenthas proven his [her] abiliry to lead the family enterprise,then it is time for the founder to follow the sageadvice,"The courageousman knows when to step back."He [she]will thenassumetherole of a senioradvisor.The founder mav chooseto continueas chai'rman or to take theoositionaschairmanofthe execuhve

comrnitteeof theboardof directorsof the over any other priority. Building on the His [her'linvaluable enterpfise. experi- strengthof this mutual bond, the heir encâ&#x201A;Źwill servethenewmanagement well apprentcanandwill eamtheir loyal supboth as a soundingboard for new ideas port. He lshelwill reaprich rewardsfrom andstrategiesandasa check-and-balance the wisdomand the steadyguidanceof mechanism. Sucha timehonoredroleof founderand thehard-eamedexperiences the founder has beenlong practicedby of old-timestaffandemployees. Bothwill maior co{porationsin the United Staies go a long way to guide the heil apparent andEurope. toward the grand prize: a successfulsucTo assurea smoothand successful cession anda legacyhe [she]canpasson hansition,theheirapparentwill bewise to his [her]heirswith well deservedpride to follow a well-knownChineseprov- andjoy. erb,"Whenyou drink the water,think of thesource."Acknowledge in wordsand Coneluslon by deedsthecontributionsof the founder It hasbeenwell-understood among andhis [her]seniormanaqement teamin informedmenandwomenboth Eastand Westthat the humanisticcharacterof the Chinesecultural tradition hasbeena major driving forcebehindthe "EastAsian Miracle." I haveattemptedto presentthelessons from this rich cultural hadition that have guidedmeandmy peersoverthelastfi$ years.Weareeagerto passour legacyon to our heirsandtheir children.Theyhave the benefit of a Westemeducationwith solid backgroundin science,technology, and disciolinesin socialsciences and humanities.By openingtheir mindsand heartsto thetimelessvaluesrootedin the Chinesecultural hadition, they will be well preparedto acceptour legacyand build on what we havebuilt. The "EasiAsian Miracle"has yet greaterfrontiersto conquer.Our heirs themakingof theenterprise.Respecttheir must be at the vanguardof our common counsel. Valuetheirexperience. Theyare effort to bring ever growing prosperity pricelessassetsfor the younger genera- and advancementto the landswe ethnic tion to haveandto hold on to ashe [she] Chinesenow call home.This is the chalendeavorsto lead the enterpriseto new lengethat confrontsour next generation. heighisof accompishment. They have our firm support and our Seventh,the heir apprentneedsto warmestblessingsastheygoforth to meet guard againstthe sirencall that a new it. It is our ferventhopethatwe haveprotrend always representsadvancement vided them with the foundationand rcand that a fle?,team is necessarily more sourcesto take up the challenge.But of effective.lntheannualsofbusinessthere all the things we can bequeathto them, aremany examplesof harm and damage that which we hold most precious,and doneto enterprisewhen incoming man- which will be mostvaluableto them,is agementindiscriminatelyreplaced semor the rich fund of principles, values,and staffwith new peopleiust becauseit was lessonsbuilt up by generationsupongenhis [her]righi io beginwith a new canso- erationsof Chinesebeforethern. called"clean"slate. In the Chinesecultural tradition, it is not the incomingmanagement's rights Fnnk Tsaois thelounder and Croup Chaitman of Groupof comrynies.He u,esauariled the but his [her]responsibilityto thefounder, theIMC "Tan Iitle Sri' in 1973W the Ktngof Mnlaysia to the long-timeassociates and employuoon the recofifiefialdtiotl of the FecleralGoLvmees,customers,suppliers,andto thecom- fient in recognitiofiof his contriblttions to theecomunity at largethatmusttakeprecedence nomicdeoelopmentof that co ntry.

THEAS]AN MANAGER. OCToBER-NoVEMBER 1995

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MANAGEMENT UPDATE: , ,l(AgEN,

B\' ['ROFLssolt RE\ET. Do\]r\co

HowtoFind HiddenWaste T ) r ' , l r l . r l ' i l i l \ L h r . r ' ' , 11 111' 1.1, 1 . '-,,, , , r - 1 . . .\ , r l l . . ' n t l \ . r nL \, ' l t l .r l\ l-,'t I n r . r ^ t; t ' r ' r ' \ . ' t . i l , , . r r r -n ' , r , r . r fr l r r ' . . r nl irrrn' , l l t , . l , t r ' 1rr- l r . ,\ r, r l coulclbem.rkingmorethanlru lost,thus hiclinsthe problc'rranrl opportunit\ to l i l r r lI n l r . l r r r ' t rlLl tl (r l r .l l t U L .r r r ,l r r r r r ' '

,r rcsuiiof hicht'rcosts,irrr1lirtl cr ntarket :harcs. l h t o t h c rt i i t c t o i n , r : t e n i l l b t o n . l ( . . r l r.l,\r ' (, il ' l r \ ,r \ \ \ . . 1 r, . r 1 , ' fr,. i , ' r ' hivr ,r ir'nclcnc\to hirle anrl ,rggra\',rte qu,rlitv problcms tlt'ftcts, scr,tp,antl re\\'ork.\\irstclulprocc!tes,trlclio lt acl

linrcr likc nr,r'rut,lcturirlg c\,clrtilllf 5,rnd ord(,rlroctssjngiinrcs.Thc rcsult\\'ill b(. , 1 l, r r , . l . l ' l r r ' - r , - r ' , i l , ' r r ' r; r ' , r i t i r r ' 1 tinres.l)oortlu,rlitr',rn11 puordclir erv tlue !\'iil L.adk) Lru cr nrarketsshart', io \\',rstL. lrsi cuslonrer:, anelloilcr proiits.Tht botIrn linc ol al] rlaste is that ihtrc rvill Lrc

, ' r r \ L r \ \ j l l l ; \ ' ' rI l I ' r , ' l l l t . r r ' - ,t - r l l - , , ' t ' -

g r a t u l , r t i o na n d c o n ' r p l , r c c n cs rc t r n . Cl't.tncts are,noborlvilr nr,rn,rgcrrlcnt r\'ill suspector in\'estigatc,rnr rr,rstciuloperatior ,rnd clccisjonmarlein the |rror \'t'ar. flffocls 0f llasle \ \ , t - 1 ,t l i l , ' l . r r l l t , ' . r - ) r ,

,,t -

-t.Itt-

ablc in tht' Iont run. Ilig)r s.rlcs,nr,rrktl shart, ,rrrclintlustn le,rrlershipilill bt \ r r \ l c ( l( \ ! r l U . r l\ L ' t t r ' t : t rL l t r rL. t r r . l l t r L u r . i r 1, ', , 1 I. l ' r ' n r , . l-|rI n r \ i l i l.( L l l L . t \ ' l rVaste $'ill be on co:t.Hithcr \\,rstt'meau I t t t l t , rr t t r i l ' r , \ l r t1, r , " ,r' . - l - ' , r - , r \ ' r . r ' costs.!Mstc bccorrcintr{r.lk'd inlo Dla ttri,rl anrl l.rLrorcosts Olerhcad irill Ino itablr',productsu hrcn simil,rrlvr.ise. clo not halt tlastcfir]pl[esscq i|ill gct thtir shart ol overht'arlu,rstc,tIIoc,tte,.1 fronru,rsteiulprorlucthncs.Br',rppliinr ihecostplusformula,hightr costsmcarrs highcr priccs.\larket slrareuill shrink ,-rs,tresultoi the troclus of lour pnrcsensiti|eclrstomcrs. I'rotitsu ill shrinkas I8

WASIE

LOWPROFTTS I

P O O RQ U A L I T Y

/ LOST I\4ARK ETSHABEI

SLOWDELIVERY

O ! r ' t , ,r r \ . , \

\ t , . 1, 1 " . , r . I I t L - \ : \ \ N l r t t t . t i

no bottom, just a line. Wasteor, nrrrdrlinJapanese,canbedelined as anvthing unnccessarvused or done ir.rthe processof coming out rvith anv output. This output can be a produ c l , r e r \ i ( e , o r i n l i r r m a t i o nt h r t i . r e tiuired or ordered by a user or custoner Wastecan be a non-valueadding input, process, or productfeature.Valueanalvsis and value engineering(VA/VE) addressthefirst and third items.\A/VE aim to eliminate unnecessarvproduct or de, sign features,and inputs or ran' matedals.Process wasiesor unnecessarv activi, ties or stepsare examinedand removed bv theindustrialengineer's rvorksimplif i c a t i o nt e c h n i q u e a n L lb v t h e b u . i n e . . processreengineering(BPR)approach.

IE llJlStEtr trEJtSEJg tg Ll

Obvious and hidden $ asles There are tu'o major categoricsof waste thai arc useful in \,vastenanagement: l. obvious$.aste 2. Japanesecompanies,knou'n for lealr and meanmanuiacturingsvstems,have discoveredthat the secondtvpe, hidden \ \ l r . l er ' r \ \ , i - t e$ t d o n ( ' i \ e e . i 5 m r r C I t b i g ger than the obviolrs wastes.Most obvivalue. Unlessinycntorv can be sold or ouswasteis tdvial and easilvcliminated. used right a\'\'at waste is incurred conThe problemis thc hidden wastethat is t i n u , ' r r r hi n i e r n r .o f h o l d i n gc , ' : r : : i n hard to spot and thereforchard to stop. ierest,space,insurance,manp,lr,r'er-and The lessonis that companiesshoulddc- obsolescenctor spoilagecost.These}rugc yote their effbrtsand resourcesin uncorcostsarecarriedin thebooksas"normal" e r i n g a n d i d e n t i f v i n g h i c l d e nl a s t c , operating expensesas if thev are necesr . r l h c rt h a nr \ d r t et h e i rt r m cl l r ( ' i i t h l i n g sarvin runningthebusiness. Just-in-time obviouswastes.Hiddenwasteis not nec- manufacturing svstt'msand the fastfoocl essarilvunseen.Thevarevisiblc,but not businesshavc debunkedthis assumption. normallv rccognizedas rvaste.Therc are Custolnerscan be sen,edand satisfiecl four tvpes of hiddcn waste: rth ilc c,rrrring,a nrinirnunrrl n,'t zer,' in 1. r,vastefrom overproduction ventorv.Do not be deceiyeclbv ncatlv ar2. wastehom unnecessarvprocesses rangedstocksin shelves,and warehouses. 3. \'\'astcfrom unnecessarytransport These mav be l'astes h.rrking for vears 4. tvastelrom unneccssarv\,\'aiting and eating your profits a\\'av Invcrltorv rvastescanbe in thc'fonr ofexcessivepurllhste from ovcrprodletion chascsof rarv materials and office supWhen defecdveproducts pile up, r.r,e p J i e . . r n t lo \ ( r p r o d u c t i o l to I r r , ' r L - i n e a s i l tr e c o 8 n i zlrl 't e . e . t . , ' b r i o u ' r r . r s t r . processanclfinishcdgoods.Therearealso and raisehell.When good protluctspile $'astesin issuing vour cmploveestoo u p . t \ ( ( . r l lt l l e . ei n \ i n t o r v . r n d( , ' t i n u ( manv pencils,paper,punchers,and other \r'ith oru work routine as if nothing unusuppliesthat thcv do not needor cannot sual has happened.lronically,unneces use right a\\'a\'. sary invcntorv is one of the biggest hidden $'astesin anv conpanv and probablv ll:rslr. fronr [nnccossar] proemorewastefulthan defects.Weset.inven- csses tory, but we are incliffcrcnt to it and rec When an enrploycccomes to lvork ognize it as curent assets,somethingof and sits clou'n thc whule dav behind his

TrrEAsrA\MAN,\cIR. OcrotsER-NovFNTBER 1995

cleskcloing nothing, l'e easilv recognize l h i . . i t u . r t i r ' ,nr . \ \ , t . t r ,a n J. l u i c k l vr c p r i mand him. But the nextrlari he comesto u'ork, picks up a pen and slarts $'riting something,anvthing,the rvholedav We "work." call this t'r'cnt Weleavetheerrr ploveeakrneand rnav e\.entap him at thc back saying,"Keep up thc good work." We don't bothert0 ask what he is wdting, rvhv and for n hom. Weconfuscmotion with work. If thereare no usersor readersof his $'rittenoutput,thenall his efforts are wasted.Thereare more waste in peoplc cloing somcthing, then in peoplc'rvho are not doing anvthing.ln the first example,the davdreamingemplovee is just wasting tirne;in the second,the busy empkrvccn'astcsboth time and paper RareJyclo emploveesdavdrcam the whole dav; most enlploveesdo something, or "nrove" thc rvhoic dav. Underneath this busvncsslies a vast potential of hidden u'aste to Lrncover.Unnecessary processes,opcrations,steps,activiticsabound in the hustleand bustleof a tvpical working dav in both the officeand factorv We teel goocl if we see people busy doing somtlhinS, whether or not it adds valueto the productor service.We

efficiency andhardworkwithefconfuse We andmanfectiveness. seeemployees agersafflictedwith AIDSor As lf Doing Something, andthisis infectious.

WASTE Itaste fi'om unnecossary transporl Whenan employeewalks backand forththecorridoror takestheelevatorup anddownthewholeday,wecallthissituationloitering,andreprimandhim right away.Of course,rarely do we seethrs obviouswaste.Whenthesameemployee walksbackandforth,thistimecarrying (possibly anenvelope empty),wecallthis "work" or "transport"of docuactivity ment.We don't botherto ask why he's transportingit. After analysisand work flow simplification,maybethereis no needto transportthedocumentat all, or transportto a closerlocationwould be In muchthesameway,if we sufficient. seean emptycompanytruck or vehicle plying its routebackand forth,we right awaycallthetransportwaste.Ifthe vehicledoesthesamething,thistimeloaded we areeasilydewith goodsor people, "necessary ceivedand call the process transport."Wetransportpeople,goods, checks materials,supply,documents, backandfortheveryday.Weseethisacworkbecause, again. tivityasproductive peoplelook busy.Wedo not seethehidtransportof den wastein unnecessary we couldnot something.In mostcases, drivers, fault the carriers- empJoyees, Theyarejust comhaulers,messengers. proplyingwith thewastefulsystemsand ceduresdesignedby management.

WASTE

Wasle from unneeessary welllng The most subtleor most hidden waste is unnecessarywaiting. We waste tlme everydaywaiting for somethingor someone beforewe could start an activitv. We wait fordelayedraw materialsorsupplies to start production. We wait for latecomersto starta meeting.Wewait for delayed transport(cars,elevators,carts)beforewe canmove things orourselves.We wait for maintenanceto fix brokenequipmentbefore we could resume our work. ln the situalion.above.we obr iouslywa.tetime and our time is wastedby somebodyelse. Whatisdifficult to spot is the hidden type of unnecessarywaiting. If an employee comes to work and stands up in the middle of the office or factorythe whole day staringinto the distance,we immediately call his attention and askhim why the hell he is doing what he doing. This obvious waste of course very rarely happens. But when the same

\7ASTE

WASTE 20

WASTE WASTE

WASIE

-**WASTE

WASTE

ufnsrc WASTE

WASTE

employee stands up the whole day, doing nothing, in front of an equipment (machinerv,fax, printet copiers,etc.)we "stadng"and "waiting" acconsiderthis tivity "work." Wearedeceivedinto thinking that he is neededthere to watch the equipment, when in fact the equipment canrun by itself without his presence.In "manmany factories, lve see workers ning" equipment when in fact they are just watchingand staringat them.Unnecessarywaiting canbe minimized by rnaking the equipment faster and more reliable, or assigning employees several equipment to handle. Spotting lvasle Wastecomes in manv sizes- big and small, and magnitudes- trivial and dramatic. They come in many shapesand colors. Not all waste is black, ugly, and dirty.lt is not alwaysin thewastebasket. Waste can be bright and pretty. Do not and "izes. be de.eived bv appearance,' Let us look for the waste that we do not see - the hidden waste. Before we can stop wastes,we have to spot them first. ln fact, recognizing waste is more difficult and important than eliminating them. Many managersfind it most difficult to admit that there are wastein their rcspectivedepartments.Finding wasteis 80% of the solution. Failure to eliminate uncoveredwaste,or tolerating it is tantamount to dereliction of managerialresponsibilit)'.Rememberthat in waste, there is wealth. Pk)f. R.]t( T. Dot,ti g. is i frll-t\tp professoral l h t A s | l t l n s l i l I / l t :o f M d t n y ' , ] ( ' n f (A I M ) d n L l l h t hol,l, r af lh. Sirt DnrL,vChnir fot MinLtltt.ttLl i,S. i iz'li'd./r.s olrr,?l ir, ts n nngc?t(fit , totnl LlunliIv k'/tttttllcn:r,nt , scIt,iIt Ll(Iii,tru, ntd IitotnRc lenI t ltlot ,tlat t1)'t svsl(',15.

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MiltonandMarketing anddistion:theaudience ofthedefeated piritedrepresents a dauntingtaskfor any marketingman makinga presentatlon. Themaintaskis to translateMilton into poet,if onesplitsthe honors,by regard- marketingterms.Thesituationis akinto ing William Shakespeare as England's that... greatestplaywright (and poet).(2) AnthonyJay,a formerBBC(BritishBroad- -..of a corporation trying to formuproducer, late a new policv after taking a tercastingCorporation) executive consultant,andtheaulhorof Management rific beating from its chief compettawl Machiaaelli, wdtten almost30 years tor and being driven of the market it readershould beable had previously depended on. ago.Thediscerning to distinguishbetweenthe two authors. In this context,a numberof marketThe Jay quotationsobviouslymeanto aremade,by different ing presentations complement theMilton quotations. Lost high-rankingdemons,eachoneoffering Onecannotdo justicetoParndise in oneparagraph.The focusof this up- a differentapproachor solutionto the dateis on Bookll, in whichtheepicpoem problem.Thefirst person(or demon)to describes, thebattlebetweentheforcesof addresstheaudienceis Moloch: good and evil, betweenthe Archangel ...Moloch, sceptered king, stood Michaelandhiscoho s againstSatanand his demoniclegions,and up, the strongest and the fiercest thelatter'sexpulsionfrom spirit that fought in heaven, made Heaveninto Hades(which, fiercer by despair. "...of God, or Hell, or worse, he without graceand God,is now a Hell-hole).Satan cared not, and these words thereafLost ter spoke: (43-50) emergesfrom Paradise My sentenceis for open war: of asthemuchmorefascinating personaliryandtheup- wiles, more inexpeft,l boast not. (51the after- 52) date describes ...Let us rather choose, armed math of losingthe battle, from thelosingside'sper- with Hell's flames, and fury all at once over Heaven's high towers to spective. A councilof demons force irresistible way. (60-62) ...What fear we then? What care meetsin to discusstheir fate.Considerthe situa- weto incenseHis utmost ire? Which

Editor'snole:Marketingmanagers only two sources,ratherthan the usual doing battlein Hades?FrankieRo- menu of severalauthors:(1) BookII of Lost,by JohnMilton, 300years manpaintsa aiztid,humorousanal- Paradise ago,and arguablyEngland'sgreatest ogyof a marketingmeetingin HelL

his issue'smarketingupdate promisesto be quite different from the previousones,for three (1)Thetypical"update"reviews reasons: marketingissuesin acurrentcontext,usuarticleswrittenby allv throughmagazine practitioners, andin recentbook byacademicians,in orderto deriveusefullessons. Thisparticularupdatetriesto extractlessonsby exploringthepast,ratherthanthe present.(2) The usualupdateoffersan -the-month"apexistential,"flavor-of proach,by studyingwhatis current,and perhapsprovideslittle erudition.On the otherhand,this updatesuggeststimelesslessons derived fromliterature.(3)Finally,this update,insteadof evaluating issues,seeksto illustrate(a) thebasicoptionsfor a marketing shategyundera crisissituation,and (b) the techniques for makinga goodmarketing presentation. The example usedin this updateis a classic, ratherthan a contemporary illustration. One other minor distinction:Thisupdatequotesftom

Howmany rnarket'ing nTanagers

actoutof spiteahm

facedwith

a,setback?

1995. THEASIANMANAGER OCToBER-NoVEMBER

to the height enraged, will either quite consume us, and reduce to nothing our essence, far happier than miserable to have eternal being. (94-98) ...Which if not victory is yet revenge." (105) The presentation is the go-for-broketype, and it can be inspiring. However,Milton,master of motivation,has captured Moloch'sprimary driver:"Whichifnot victory is yet revenge."How manyCEOsor marketing seniorvice-presidents haveseentheir marketing managercact out of spitewhen facedwith a setback? Moloch,...

Anaudience usuallyruns ONA LIFO

mentalmodn, thatis,thelast thought that thepreuious speaka says becoma the

firstorfinal thought in theirmind,s.

m aturestcounsels:For his thoughts were low To vice industrious, but to nobler deeds timorous and slothful. Yethe pleased the eaL and with persuasive accent th us began: ( 108-118) Whateverhis personality profile,Belialis no amateur orator. He knowsthe pros and consof beingthe "next"speaker Molochhas a w a k e n e dh i s a u d i e n c e fromthestuporof theirloss, and he realizesthat an audienceusuallyruns on a LIFO mentalmode,that is, thelastthoughtthat thepreviousspeakersaysbecomes the first or final thoughtin theirminds,Sohemustfirst demolishMol-och'splan:

"First,

what revenge? The towers of Heaven are filled with armed watch, that render all accessimpregnable..." ( 129-13 1)

...goes on to talk in emotional language about fighting back: he is the classic instance of th e uni nteIIig enL uni mag i native, bu Il-at-the-gate exBelialthen proceedsto develophis ecutive with massesof drive but no theme: brain; he is contemptuous of those "Heed who want to think and plan. ln other my advise: since fate in"Don't words: letb stop and analyze evitable subdues us, and.omnipowhat went wrong or reconsider our tent decree the victor's will: general policy; let's just raise more To suffer, which to do our capital, re-equip the factories, boost strength is equal, nor the law unour advertising, train more sales just that so ordains... (197-201) staff, and try again." Most firms This is now our doom;...which if have a Moloch, and he is usuallv an we can sustain and bear, our suinvaluable assetso long as he istold preme foe in time mey much remit exactly what to do. He uses energy His anger, and perhaps thus far reand emotion as a substitute for moved, not mind us not offending." thought, and instead of thrashing (208-212) out policy, picks out the simplest solution because it is all he underBelialistheexactopposite of Moloch, stands. brainswithoutguts,Belialis... Belialis thesecond speaker. Hehashis own,particularskills: ...Onthe other side up rose Belial, in act more graceful and humane; ...But all was false and hollow; though his tongue dropped manna, he could make the worse appearthe better reason, to perplex and dash

...highly intelligent, and although his critics would call him a pessimist or a defeatist, he would probably call himself a realist. He proposesan alternative plan, which in fact is not a plan at all: to acceDtthe inevitable.ln other words: ',Letbaccept our defeat, accept that we're a small firm now and not a big

. OcroBER-NovEMBER THEAsrANMANAGER 1995

one...circumstancesmay one day change and we may have a chance to get back again, whereas if we take Molochb advise and fail we will not existat all." Molochand Belialrepresenttwo oppositesof the stereotypical marketing managers-a lineoriented individualversusastafforiented individual.Theformer seesonly the marketingarena,and can only think of going out to do the same thingoverandoveragain.Thelatterperhapsis overwhelmed by defeatanddata, andlackstheformer'sfightingspirit.The CEO/MarketingSVPmust often weigh therecommendations frornthesetypesof individuals.Butall is not lost.Ifany marketing unit hasany competence, it will havea Mammon- thethird speaker, and an astutegaugeof human(or demonic) nature: "Suppose

He should relent, and publish pardon to all, on promise made of new subjection? With what eyes could we stand in His presence humble, and recetve strict laws imposed, to celebrate His throne with warbled hymns, and to His Godhead sing forced hallelujahs; while He lordly sits our envied sovereign, and His altar breathes...our servile offerings. This must be our task in Heaven, this our delight. Howwearisome eternity so spent in worship paid to whom we hate.: (236-248) Mammonthustakesa differenttackin his presentation.Unlike Belial,who startedby destroying Moloch'sargument, Mammoncompletely ignorestheprevious speaker,becausehe intuitively realizes thatno audience is readyto acceptdefeat, leastof all marketingmen (andwomen), who arepeopleof action,accustomed to living on the edge,and who are always readyto try anythingwhich might have theleastchanceof success. Mammoninsteadgraspsand builds up the essence of an unstatedideain the mindsoftheaudience, namely,tobetaken overby thevictoriouscompany, and immediatelydemolishes it: Not for him the specious cant about

"not being in the long term interests of shareholders"; he goes straight tothe heaft ofthe matter,and voices the emotion which (whatever the officecircular may say) is uppermost in the breast of every director (and marketing manager) th reatened with a takeover by a victorious rival: the complete and utter humiliation of it. Many taken-overdirectors and executivesi n defeated corporations have learned what it isto sing forced hallelujahs, and most would share Mammonb views about it. Mammon'sopeningremarksthus Morethanthat,he speakto all managers. is thefirst to proposeany kind of a wellthoughtout marketingstrategy: "This

deseft soil wants not her hidden luster gems and gold. Nor want we skill or aft, from whence to raise magnif icence... (270-273) To found this nether empire which might rise by policy and long process of time in emulation opposite to Heaven." (296-298) Mammonthusoffersanotheroption, the terms,to reengineer in contemporary by: corporation ...developing the possibilities of Hell: " Let'sstaft developing the few products we have left, and perhaps develop some more products along the same line, and drop the products that we're being beaten on. then if we put our heads into it we can be a big firm again, in different lines." Theaudiencereactionis positiveand instantaneous: As Mammon ended, and his sentence pleased, advising peace.-. (291-292) ...Whbh when Beelzebub perceived, than whom Satan except, non higher sat, with grave aspect he rose, and in his rising seemed a pillar of state;... (299-302)

seriousmarketingsetback-to fightback, to give in, to reassess. At this point,the issuemovesfromformulatingstrategyto implementingit. And the tum comesto Beelzebub,apparentlythe Vice-Charrman,and a demonof statureamonghis pee6. goesstraightto thepoint, Beelzebub andsuggests: ...Whatif wefind some easierenterprise? There is a place ...another world, the happy seat of some new race called Man, about this time to be created like to us, though less in power and excellence...Thither let us bend our thoughts, to learn what creatures there inhabit, of what

Rebuilding the corporationfrom thegroundup aftu a rnajor setback mightbe tbeunimaginatiue the butultimately rnoresuccessfal approach. mold or substance,how imbued,and what their power, and where their weakness, how attempted best by force or subtlety. Though Heavenbe shut. and Heaven's high arbitrator sit secure in His own strength, this place may lie exposed..."(344-360) Thus Beelzebuboleaded his devilish counsel, first devised bv Satan. (37&380)

optionsandthenofferingthe opponents' final option (basedon LIFO,as noted) appearsto work,at leastin thissituahon. SoBeelzebub: ...proposes the fourth possibility: Notfighting back blindly, not accepting passively, not developing new products, but seeking out new markets,and he suggests a preliminary surveY. Satanfinally stepsin asChairmanof the corporation,and as the final arbiter of thefirm'smarketingstrategy: Satan with now transcendent glory raised above his fellows, with mon-archicpride, consciousof highest worth, unmoved thus spoke: (427-429) " But I should ill become this throne, o peers, . . .i f a n y t h i n g p r o p o s e d a n d judged of public moment, in the shape of difficulty or danger could deter me from attemptin9... (445-450) While here shall be our home,... do what best may ease our present misery, and render Hell more tolerable; (458-460) ...while I abroad through all the coasts of dark destruction seek deliverance of us all. this enterprise none shall partake with me." (463466) Thus saying rose the monarch, and prevented all reply; Prudent, lest from his resoluteness raised, others among the chiefs might offer now (certain to be refused what before they feared. ...and so refused might in opinion stand his rivals, winning cheap the high repute which he through hazard huge must earn. (466473)

And sb,the final solution,in a manner of speaking,is to go into the export Beelzebub is apparentlyin leagle with business,by developinga new market because heputsforwardthechair- calledEarth(andMan).Thefinal section Satan, man'spolicyasif it werehis own, so as ofversesis illuminating,andoffersmany im- lessons:Note that Satanhimself,as an thechairmdn's apparent to preserve personallyflies partiality- a worthy tacticfor anyone exampleto all chairmen, andreporton thenew trying to get a marketingplan through. out to investigate Thus far, Milton and Jayoffer three Thereareprosand consto beinglastto market,whileothersstdybehindto imwhich bemarketingresponsesto the problemof a speak,but the tacticof exhaustingthe plementMammon'sscheme, 24

1995. THEAsrANMANAGER OcroBER-NovEMBER

" Are u)omenbetterin business than menT "HouD did thetop womenexecutiaes get to utheretheyare?"

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who must operateand competein a male-dominatedworld, and as a wife and mother fulfilling social roles determined by strong oriental vaiuesand expectations. "Thus, the pressuresof becoming a competent and effectivemanager are often rivalled by the pressureto succeedin her role as the proverbial nurturer." - fron the introductionby VictoriaLicuanan,editor To find out how thesesuccessfulwomen entrepreneursfacedand overcome thesepressures,buy the book! To order,fill out the reservationform below or sendus your name.title, company,address,phone and fax to our e-mail/internetaddress: tam@aim.edu.phor call (632)893-3341or fax to 1632l, 917-9240

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THEAsrANMANAGER. OcroBER-NovEMBER 1995

"fall-back" strategv Satantakes comesa imn.rediately cuts off all the task but on preFinallv, his forcefulness discussion. from belatlesser chiefs, vents the othet "oneedly playing the usual game of upmanship", once the direction is clear. This update from an unlikelv source still offerstimely lessons:Considerthe complexity of the marketing task in this brave neu'world ofopen markets,global i n t e r de p e n Je n c e ,p r o d u c t i n n o t . t t i o n . and easeof entrv by competitors. This update warns the un$'arv managerthat marketsare no Ionger secure,and a company'. sh,rreof marlet candrop precipitously in a short period of timc. Furthermore, globalizationcreatesa trend towards buying market share rather than competing in the marketplacefor it. So

"forced hallelujahs" the notion ofsinging to d ner! ma5teri. nol loo,rlicn d porcibilitv. Finalll', this update does not endorse a strategyofentering into the export market as the automaticsolution to the problem of a lossof one'smarket. lndeed, the bulk of Pnrndlselosf (after Book ll) goes on to describethe successfultemptation bv Satanof Adam and Eve, and the clire consequences of that act on Satanand his minions; even the "fall-back strategy" fails beforedivine n'rath as Hadesis levelled and the demons transformedto ncar-animals.One of Milton's kev subthemes in the epic poem is the conscquenceof pride, which Satantrcice-demonstrated: in believing thai he could overwhelmHeaven,and in beingblind-

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1995. THEAsiAN MANACER OcroBER-NovEMBER

Editor'sNote: In thelast issueProf. Mayo Lopez zttrotesbotttAsian Stereotypesperpetuated fromthe about West.Herehezurites therootsof Asiancultural ualues, ultichcouldexplairt the d ifferencesbetuleen Enstand West. llhy tho appar.ent differ.ences Much of the observed behavior differences among different peoplesare strongly influencedby severalkev vaf ues.Thesevaluesincludehow people value the individual compared to the group; how thev handle time and space; social opennessor ethnocentdsm;respectfor tradition and elders versus a high value placedon new knowledgeand those$.ho possessit; conformitv versus uniqueness;risk taking or avoiding; the strengthof ourdesire to maintain social harmony versus "frankness,""objectivity,"and economic efficiency; and be"idea-or-issuetween being "peooriented" \'ersus being ple-and relationships-oriented." In discussionswith colleaguesand from rny own experiencesthe perceiveddiffer"either/or" abencesare not ( f r a n k versus not solutes frank, risk averseversus daring). Tl.reyinvolve differences in termsofdegrees,rvhich are affected bv socioeconomic conditions,Ievelof education, position in society,the perceptionsofthe costsoffailure,and even physical health. "WesternCaucasiansand ized" Asians seem driven by ihe twin needs to perform yery rvell to show personal achievementand acquirematerial wealth as symbols of "having arrived," that is, being recognizedas excellent p e r f o r m e r sa n d a c h i e v e r s .

family,includingaffinalrelations. Whateverthefocusof our communality,we havedifficultiesdealingwith Caucasiansbecausethey seemto misundentandtheeffortswe take to harmonizeour lives alonglinesthatfocuson these groupsof reference whichoften conflictwith the striving for work efficiency loyalty to their Japanese and dedicationto companies their work is culturally dictated.It is equallya sourceof problemsin their dealings with the otherAsians.The of socialharconcept Japanese mony is premisedon everyone doing their duty as dictatedbv theirpositionin society. FamilvandclanareimporWork tant to the Japanese. hou'ever,seemsthe main meansofcontdbutingto society. This high concetnfor work is sharedby othersocieties we have often termed "Confucian"Taiwan,Hong Kong,SouthKorea,and Sinfamgapore.In thesesocieties ily andclanareequallyimportant,butevenmoreimportant seemsto be productivework whichbringswealth,whichin "face." turn makesfor great Contrastthesewith the many,other greateremphasis It is common for Westerners, ism has different foci. The Asiansplaceon familyand therefore to talk of company Japaneseare seenas the most affinal group obligations.In our dutiesas loyalties sincecompaniesare nationalistic(beingJapanese), our societies, in company do not men, then as workers a within which one then as corporate the venue rank as high as our obligations But family men. TheChinese seem seekspersonalacclaim. familyandaffinal while there is aln'ays much morefocusedon clanand fam- to extended "being part This hasto do with a ilv, their specific ethsystems. talk about of then on "maximizing group: Hok-kien, long history of interfamily, nolinguistic team" and effirivalinterclan, and intertribal Hakka. The Inciencvand effectivity through Cantonese,or what were ill-unof des within the team," there is greaterat- donesiansseem conscious "looking geoderstoodandthreatening their extended family, town, tention to out for "getting physical environments. One group, number one" and region,ethnolinguistic "the wolf pack" only the family, in that could trust and nation, order, ahead" of the "swimclan, and tribe. This caused in the "rat race" while though company affiliation is ming with the sharks!" c o m i n g i n t o p r o m i n e n c e . major conflictsbetweenus The imagery of predatory Other groups,Filipinosfor ex- and those for whom we selfishnessexaggeratesthe ample, seemmore concemed workedfor ln partsof traditionalAsia, level of Western individualwith loyaltiesto the extended Helping their corporations make a bigger profit and being rewarded for the effort are the sociallyacceptedmeansof doing this. To achieveorganizational efficiencvand profit ability, manv of them give their best efforts and much of "p me their time" to the companv rn tne Process. The work group or teamis a vehiclewithin which onecan maximize chancesof increasing individual distinctiveness.

1995 THEAsrANMANACER. OcroBER-NoVEMBER

ism.Butthereis enoughin the popularmediato justify the perception thatAmericanculture is highly individualistic. Thiscanbea problemto those of us who havebeenraised with morecommunalvalues in thewayweareoftenforced to conductourselvesin the managingof enterprises since many of the prevailingmanagementmodelsare really Americanin origin. Clearly,Asiancommunal-

work andsomeincomewill be Thisacceptance ofa prede- sionandthe meetingof com- thingmadeby manthatis essacrificedto fulfill socialobli- termined"rhythm" to life is mrtments. sentiallyreplaceable, you are gationsto the family,clan,or part of a morebasicvalueof Timeprovesimportantto called a vandal. When you tdbe.In fact,productiveuses fatalismwhich resultsfrom thosewho arein massindus- destroysomethingmadeby of wealthwill be sacrificed to not knowing enoughabout trial productionor in twenty- God that is essentiallyirremeetsocialexpectations. Peo- our world to believewe can, four-hourindushiesandserv- placeable, you arecalleda deple will sell prized,or pro- to a greatextent,controlthe ices.Materialwealthresults veloper" ductivepossessions-apiece way of our livesflow. Scien- from producinglargenumMostol us in subordinate of land,a waterbuffalo,farm tific/industrializedsocieties bersof desiredgoodsor serv- positionsdo not seemto apor fishingimplements-soas have advancedenoughin icessoldat pricesthatallow preciatebeing allowed to not to suffersocialshamein knowledgeandtechnology to the producersto makehefty makedecisionsfor ourselves not havingcelebrated a wed- feelmoresubstantially in con- profitsevenastheysatisfyor asCaucasians do. Webelieve ding, a marriage,or a burial hol of theft lives,evendesti- delight their buyers.This thatbosses arebosses because properly.Caucasians andJap- nies,thanhavea greatmany proactivestanceresultsonly they are supposedto do the aneseexpatriatescan only of traditionalpeoplesin Asia. frompeoplewhoarenotfatal- thinkingthentellus precisely shaketheir headswhen they isticaboutlife. what they want. Our relucarerequested to excuse workIt is no accidentthat the tanceto takeon resDonsibilitv ers from work as they need peoples whohaveprogressed is not only partlyJue to this time io fulfill familialobligathe most materiallyare also but alsopartlydueto our detions neitherthe Caucasians thosewhoseideologylooksat sire not to be embarrassed nor theJapanese considerimwealthas a rewardfor their when we commit mistakes. portant. hardworkin theformof tech- MistakesmavshowstuDiditv TraditionalAsianshaveto n o l o g i e sT. e c h n o l o gay l s o a n d w o u l d r u i n * h a t e v e i understandthat the Caucafavorsmeasurement andpre- "face"we needto put on besiansand the Japanese are cision. foreour superiors. productsof a differenilife phiForusAsians,thehighre[n countdeswhere to demlosophyand of culturesthat gardandloveour familiesand onstratethe acquisitionand havegiven work one of the friendshavefor us areGod's the masteryof new knowlhighestvaluesin life. To be blessings. Thus,we risk even edgeis a signofbeinga quick productiveis to show one's thelossof work aslongaswe and good learner,and thereworth. To be produciveis to are seenas fulfilling familial forean ableperson,subordiearna lot. Toearna lot is to be obligations. Our Westerncol- natesseekto begivenmorcreable to provide oneselfand leaguesfear more not being sponsibilityandthechanceto one'sfamily the kind of life ableto give theirchildrena be allowed to experiment. that theseculturesbelieve Our irdtating latenessin decentmateriallife in the fu- Many of us preferthe "slow worth living.Evenwhenthey arriving for appointments or ture than we do. In contrast but sure" path of beingtold are supposedlyrelaxingand startingactivitiesasindicated we fear tnorebeing seenas andshownstep-by-step what enioyingthemselves like play- in formal programs;our in- unloving ogresby our chil- to do. ing golf or drinkingcocktails, ability to plan out our activi- dren. We as traditionalDeoDle the conversations in theseac- tiesso that we canfit our acIt hasalsobeenpointed takecomfortin the familiar, tivities often reflect that pre- tivitiesinto prearranged time out by many speculative becausethe tried and true occupation with work. slots(aidedby filofaxes,and thinkersand studentsof his- waysspareus therisksof exCaucasians andjapanese, time managers)have been toryandthesocialandhuman perimentation and failure. and now increasingly the in- givenmanynames-"Filipino sciences thattheWestmoored Thevarealsothe productsof dustrializedTaiwanese, Sing- time," "jamkaret"in Indone- in Judeo-Chrisiian-lslamic tra- our elders'individualandcolaporeans,and Koreans,also sia,"Malaysiantime,"andso ditions,caneasilyhandlethe lective experienceand wisfind it difficult to deal with on.Wesummarilydismissas nonhumanresourcesof the dom,andhavecarriedour so"haditionalAsians" because difficult to understandcul- world asthingsfor their dis- cietiesthrough the worst of we havewhathasbeencalled turesthatfind tardiness orde- posalratherthan thingsthey times. a nonscientificapproachto liv- laysof fifteenor moreminutes arestewardsof or evenother Our Western Friends, ing.Weacceptthatwe cannot offensive. sentientformsthat alsohave however,delightin questioncontrolthe world. We accept WhenCaucasians, Japa- souls,and must thereforebe ing anythingthat is therealthattheworld hasa rythm of nese,Koreans,or Taiwanese respected. ready.That is why they can life not subjectto humanin- insiston beinghard and fast Curious,however, thatit is say,"lf it's notbroke,fix it anytervention. Wesupposedly re- with schedules, it is not that a Westerner(JosephWood way,"whilewestillmostlygo flect this in our lack of sufi- theyareautomatons; theyare Crutch)who shouldreflect by the statementthat says, cientlydetailedplanningand merelyreflectingthe impor- thisrealizationwhenhe said, "Leavewell enouqhalone." in theway we handletime. tancesystemsgive to preci- " W h e ny o u d e s t r o ys o m e Soingrainedaieourtradi-

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OCIOBER-NO\ LMBIRIqq5. THEA5IANMANAGER

A'IAN Join tLa GROWTH 7thNM Management on Asia Conference POTYGON' SAIM

T h e A s i a n l n s t i t u t eo f M a n a g e m e n t ' sC o n f e r e n c eo n A s i a (AMCA) brings together,as it has in the past six years,the CEOS f r o m l e a d i n gc o m p a n i e sb, u s i n e s s m e ng,o v e r n m e n tp o l i c ym a k ers,and academicians, to shareinsightsand explorethe challenges of a globallycompetitiveenvironment.This year'sconferencefeatures plenarytopics and simultaneoussessionson three growth polygonsand the EAGA experience. The opening of world marketsand intra-Asiantrade triggered r e g i o n a li n t e g r a t i o na n d l i b e r a l i z a t i om n o v e m e n t sa s d i s p l a y e d by GATT,APEC,AFTAand the Asian growth polygons. The conferencewill define what growth polygons are, their locationand how they developed,bottomline expectations,essentialsuccess factors, investmentpotentialsand prospects,critical issuesand common pitfalls.Specifically,it will focus on currentsituationsof SlJORl,the Baht Economy,and South China-the natureof complementarityand its infrastructureand businesssupport systems.

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Yes,I want to know more about the 7th AMCA Asian Growth Polygons. P l e a s es e n d m e f u r t h e rd e t a i l s . Name Company Address Telephone

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CONTACT

Ms,EDYTHE BAUTISTA Public Affairs Office Asian Institute of Management R.McMicking Joseph Campus '23Paseo deBoxas. Legaspi Viliage Philippines 1260 Makari City, FaxNos(632) 8119240I 8112128 Telephone Nos (632)89314101892 1T 401 loc209&1M

tsF

thg concluding session of the conference features Dr. Kenichi Ohmae, author of critically acclaimed Triad Power (Free Press), The Borderless World (Harper Business), and The Mind of The Strategist (McGraw-Hill) will make a presentation on how regional economies harness the prosperity of the global economy. DR. KENICHIOHN,4AE

TETTAITVE GOIUFEREIUGE PROGRAMME MARCH 11 (Monl 7:00AlVl C0NFERENCEG0TFTOUBNAMENTTEE-0FF REGISTRATION 6:30PM EARTY ANDG0tt T0URNAMENT 7:00PN.4 WELCOME C0CKIAILS AWABDI'{G CEREMONIES MARCH 12 lTue) 730 830 SEG|STRAT|oN B:30 900 NATI0NALANTHEM lnvocatton Welcom€ Remarks Speaker: Washington SyCip Asian Insttute0f Manaqement Co-Chairman, 9:00- 9:30KEYN0TEADOBESS 9:30 9:50PLENARYl: AN OVERVIEW0t{ ASIANGB0WIH P0tYG0t{s TheAsia/As€an regional integrati0n and liberal sati0nmovemert asdis0laved by GATT. APEC. AFTA andthegrowthpolygons. p0lygons Presentation hones inonwhatgrowth are, ther Ocati00 andh0wtheydeveloped Essentiai success f€ctors and comm0n lssues willals0betackled. BREAK 9:50-10:20G0FFEE 10:20I 1:20PLENARY ll: SU0Rl.THEBAHTECON0MY AND SOUTHCHINA p0lygon Presentations onhoweachgrowth itscurentsituation, nature 0f developed, c0mplementarity andrtsstate0f infra-structure and business suDDort svstems FOcuses 0nissues and

pr0spects andb0tt0m Inemplrcatr0ns l1:20'12:00 0PEl{F0RUM 12:001 30 LUNCHE0N

r 30 300srMutTANE0us sEsstoNs pracritolers sldre hp erpererces Business n each groMh polygonby expounding 0n the curent 0pp0rtunitres, busrness/ investmertp0tentals and pitfalls.

1 .S t J 0 8 l 2 TheBahtEconomy 3 South Chna 3 0 0 3:30C0FFEE BBEAK 3 3 0 5:00SIMUtTANE0US SESSI0NS practiti0rers' Contnuat0n 0f business Presentati0ns n eachgrowth 0fexperiences polygon. 1 SIJORi 2 TheBahtEconomy 3 South China MARCH 13 {Wedl 9 O O ,9 3 0 S U M M A ROYF O A Y O NPER O C E E D I N G S 9:30- 9:50P.LENARYIII; oVERVIEW 0NTHEEASTASEAN GBOWTH AREA Presentation w ll focus on theevOutiOn 0f Eaga , ls cutrent status ard thebusrness/ nvestment 0000ftunrtles available 9:50-10:20COFFEE BREAK 10:20I I :20PLEI{ABYlV: EAGAMlNlSTEElAl" FORUM KeyOfficial representatives fromBrune l, Indonesia, Malaysra andthePhI ppn€s present c0!ntry expectatiOns of EAGA and hiql^riqithppffons and(ommitmprF madetoensu t hr es u c c e sosft h e a l l i a n cCef .i t i c a l

1995 THg Aslerv MANAGER. OCTOBER-NOVEMBER

issue afd c0ncefnsof the privatesect0rwiI a so be addressed ll:20 12000PENF0RUM 12:00 1 30 |-UNCHEoN 1:30- 3:00 SIMULTANIOUSSESSI0NS share C0mpanies repres€flng keyindustries the r experences0peratlngufder Eaga particrlary 0n the pr0gress 0f eachind!stiyandtherr v sionof the future. i servce sector(t0!ilsrn,genefallradrfg,elc.l 2 iftrastructure deveopment 3 manufact!rirq 4 reso!rces 3:00

3:30 CoFFEEBREAK 3 : 3 0 4 0 0 P L E N A R Y VT: H E E N D0 t T H E N A T I 0 N S T A T E (CorcudlngSessrof) t0p busiressg!rus 0f t0day 0ne 01the widelyfecOgnized and author0f the h gh y acclatmedTrtadPowerand The BordetlessW7rldshateshis thoughts0n h0w reg 0na ecoromieshafnessthe pr0sperty 0f the globalecOnomy

Speaker Kenchr0hmae Afihat.fhe Eildaf theNattonState F0BUM 4:00- 4:30 OPEN 0f 4:30 5 00CtoSlt{GREMAR(SANDPRESENTATIoN PTAOUES OFAPPRECIATION ProfFeipeB Alfonso President, AsiarInstitute 0f l\,4afaqement

tions in our souls that they often prevent new ideas from being considered,especiallyif theseideascontravenethe old. This may explain the slowness in the generation of new knowledge or in the acquisition of existing but alien ones, unlessthesehavethe blessings of the elders and our cultural "gatekeepers." And very often, gaining the thrust of the gatekeepersis much less the result of the demonstratedefficacyof new technologiesand more the result of the purveyor haaving gained the liking of our elders.I have often heard Asian supervisorsand managersdismissa new idea by saying."What gadfangled thing are we going to try again?" Our risk aversion is also reflected in our desire to conform to the majority.Clinging to the group gives us the strength and majority's identity and support, and the comfort of being hidden in the sameness.People who have new thoughts and new ways of doing things will and do stick out and more often than not draw the attentionof those who may hammer them back into the grain of sameness. Perhapsthe result of long decadesof being small tribes whose members had to rely very much on one another for survival, we are, in this modern day and age, still concernedwith maintaining high levels of harmony-which many of us define as the absence of strife-even at the costof honestyand our rights and priviledges. Many of us find it difficult to call a spadeespeciallyif we stand the chance of hurting feelings.We go through great lengths to say things in ways that will not offend, even at the risk of not being able to convey the right message.I have seenenoughcaseswhere 30

calling a spadea digging implement resulted in greater problems which were resolved only with great pain much later. Our Western colleagues may be right in this case While we are group oriented, we unwittingly sacrifice the benefit of the group to avoid hurting an indvidual to benefit the group by telling the individual painful truths. Funny, but true. I remember a case where a company run in the traditional mannerfinally decided to use a performance appraisal system. Practically everyonegot averageand excellent ratings. The sad part was that many people were clearly not meeting standards. But not wanting to offend the ratees, many of whom were older than their supervisors,the ratersopted, without consultation,to give averageas the lowest grade. In still anothercompanya certainamount was set aside for performancebonuseswith expectationsthat the bestperformers would get as much as 15%.What actuallyhappened was that the highestbonuses were 5% and the worst producersreceived3%.Why? Because their senior managers felt embarrasedat having to deny many of the older workerswho were slower at learning new systemsbonuses.After all, they had shown loyalty and obediencein acceptinga new and untried system. Most Westernsystemsare basedon Max Weber'sclassic bureaucracy which stressed o b j e c t i v ed e c i s i o n m a k i n g with a minimum of emotional considerations which cloud judgment. Traditional work teams are seenmore as families and in fact claim to be so, with titles reflecting the "familiarity" of the arrangements.Asiansseem'morelib-

eral in using forms of address like "son" and "daughter" to addresstheir employeesthan are Caucasians.Filipinos call their peers "padre" (from compadre or fellow godpar"tol" (short ent) or for utol or brother). The ]apanesealso call their peersa similar title. The social space between people in corporations seems larger and further in Caucasian companiesthan in Asians ones. To get very close to another in the West means extreme closeness,even conspiratorial closeness.In Asia it is merely good form to get close and even place one's hand on a subordinate's shoulder or siddle up to a boss to indicateintent listening and attention. Given theseseemingwide disparities,what canwe really expect?

human resourcedevelopment (HRD) requirementsrelative

to their strategicthrusts,I was constantly reminded by *y consultors in the bank that "Insonesians are different. We don't like criticism, unlike the "orang putih" (white men)." Fortuitously the Herald Tribune had printed a short essay which was titled, "Americans Don't Like Criticism, Survey Says." I hastily clipped this article,made multiple copies,and circulated it to all senior managers.The look of surpriseon their facescould be seenclear acrossthe halls. "Ado! Sama Indonesia!"(Ado! Thesameas Indonesial) I have also heard many Westernersand Japanese friends speak longingly of what they consider very warm and appealing atmosp h e r e s i n S o u t h e a s tA s i a n Convergenee companies.They like the Despite the many differfriendliness, even the "No ences,separateforces acting problem!" attitudes they ofon the different societiesare ten seeus take, in the face of forcing a universal desire to great inconveniences.They work more smoothly with one are impressedby the caring another. and concernfor otherswe ofJ u s t a s w e t r a d i t i o n a l ten show. They apparently Asians are realizing that we wish to see more of these in will have to change our their own compalies. behaviors and attitudes to be Incidents like these are more competitive in this modshowing people all over the ern world, the more industriglobethatwith enoughsincere alized and scientific people discussionover common infr'om America, Europe, and terests,together we can break Asia are feeling the need to be down many culturalbarriers. more human, humane, and The desire to work produccommunal. As we discover tively with people from other new knowledge, science/and cultures makes each of us technology,Japan is finding more willing to make all those out that ethnocentricismhas small one. And the bridge is serious drawbacks and they built faster when both sides are adapting to and adopting move towards eachother. different Asia ways. The West is rediscovering the joys of a Prof. Mario Anton4oG. Looezis the more communal and caring PitipinasShell CorporationProfessorof society less hung up on the Pu b l i c A d m i n i s t r a t i o na n d A s s i s t a n t a c c u m u l a t i o n o f m a t e r i a l Deanfor theExecutiaeDnelopmentProgram. His current interestsare mana&ewealth. r ial deuelopment, deuelopment manage ln 7987 I was helping an ment,cross-cultural management, and Indonesiabank determineits projectdeaelopment and management. OCTOSTn-NovEMBER 1995OTHEASIANMANAGER

,:!'

BY PROFESSOR ERROLB. PEREZAND PRoFESSOR AIDA L. VELASCo

HowRis Are Philippine OS? IIO returnhasoutperJ nitial PublicOffering..morecom- der performance. monly Lown TlO5, as areun5e,ti\'ned formed the market eightout thethirteen I offeredto thepublic monthsbeingstudied. A testof differI commonstocks forsubrcription. Companies gopublicin encebetweenmeans,showsthatthereis ordertoraisecapital forexpansion or debt a significantdifference betweenthemarretirement.For severalyearsthe Philip- ket indexreturnand the IPO returnfor pinecapitalmarketshave beenactively thefirstyearIPOsaretradedon thefloor. offeringlPOs.It hasgenerated substantial interestfromtheinvestingpublicbecauseof the perceivedhigh returnit has earned.In financeliteraturcnumerous studieshavebeendoneto verifythe abnormallyhigh return lPOs generate. Theorieshavealsobeenproposedto explainthe IPOunderpricingpuzzle.IPOs arebelievedto be underpricedin order to compensate the investorsfor the risk they have to bear.Investmentbankers alsounderpricetheissueto minimizethe A 5% level ofsignificanceanalysisshows riskandcostin sellingtheissue.Thus,un- a t-statistic of 0.1627,which concludes derpricingis usedas compensation for that IPO returns are higher than market return 95clrof the time. therisk onehasto bear.

Ilterish'is tlnraultof tlrcisu.eb urcunoned pduvnrrceintbe narket.

The llata A studyof sixtv-eightIPOsofferedk) thepublicfrom 1986wasdone.Monthly returnswerecomputedbasedon thepreviousmonthsclosingprice. Ilata Anallsis PhilippineIPOsshowedinitialreturn of 30.71% on thedayof listing,whichdiminishesto 0.144% oneyearaftertheofferingperiod.Figure1 showsthe movementof the returnversusthemarketin-

Standarddeviationsof IPO returnsare also higher compared to the standard deviation of the market index return. Figure 2 revealsthat differencebetweenthe risk on IPO and the market as a whole, measuredby the standarddeviation. TableI reveal:that therisk borneby the investors on lPOs is significantlv higher than that of the market 95% of the time, rvith a t-statisticof.0026. As seenin Figure 2, The standardderia tionoI thc marLetinde\ returnis poii. tively correlatedwith time with a coeffi-

THEASIANMANAGER. OCTOBER-NOVEMBFR 1995

cient ofcorrelationequal to 66.66%.Computation5arepre5ented in Table4. However,Table5 shows that IPO risk dimrnishesthroughout the one-yearperiod of study with a correlationcoefficientof 19.37%. Although the correlationis negative,the relationshipoffisk to time is not statisticallv conclusiveat a 5% significantlevel. Conclusion The returns on investment in Philippine lPOs are significantly higher than that of the return one r.vill get in investing in different stocks comprising the Philippine StockExchangemarket index. This abnormallyhigh return is a payment to the investor for the high risk of IPOs . The risk is the result of the issue'sunseasoned perforrnancein the market. However, as the risk diminishes becausethe market beginsto reflectall relevantinformation on the price of the stock, the returns also decrease.Thus, the investors who subscribeto the offcring price, when risk is highest, are the onescompensated in the form o[ return,rreragingapprorimately 3l% per month. Plof. EfioI B. Petez is n rw'lb(r of NdJr'' fuctlltt of lht Miskr l| M logct dt Pn)lra . Ptof. Aidi L, Velascois d,i . sso.inlf Profi,ssor", Cr)/ legcaf Engnnrn ng,Dtpnrt]It t1lol Itd Ltsl rinl Eltg],tttr , , . . iD , L , 5 , t ' , L r ' . r ' r " r ' ! ) ' . 1 . D B A C t t i l n I . r t

Table 1

Table3

NUI\4BER OF CASES:13 NUtrilBER OF VARIABLES:4

NUMBER 13 NUMBER OFCASES: OFVARIABLES:3

DIFFERENCE BETWEENMEANS:PAIREDOBSERVATIONS

= HYPOIHESIZED DIFF. 0.0000 MEAN = 0,0223 STD.DEV= 0.0783 = STD.ERROR o.0217 = l TO 13) N = 13 {CASES T = 1.0254 (D.E= 12) GROUP1: iporet GROUP 2: indxret P R O B=. 0 . 1 6 2 7

DIFFERENCE BETWEEN MEANS: PAIRED OBSERVATIONS HYPOTHESIZED DIFF,= MEAN = STD,DEV = STD.ERROR= N = -3.4064 (D.F.= 12)

PROB.= 2.604E-03

0.0000 -0.1250 0.1323 0.0367 = 1 TO 13) 13(CASES

GROUPl:stdmkt GROUP2: stdprice

Table5

N U M B EO R FC A S E Sl 3: N U M B E O R FV A R I A B L E S : 3 INDEX 1 2 DEPVAB,

NAME month stdmkt

I\4EAN 6.0000 0.1147

stdprice

0.2398

STD.DEV 3.8944 0.0452 0.1141

DEPENDENT VARIABLE: stdprice VAR month CoNSTANT

REGRESSION COEFF,STD.ERROR -0.0056 0.0087 0.2136

T(DF=I1) -0.650

PROB. 0.52900

sTD.ERROR OFESr= 0.1169 = 0.0370 r SOUARED r = -0.1923 ANALYSIS OF VAAIANCETABLE SOURCE SUMOFSOUARESD.F. MEANSOUARE F RATIO PROB REGRESSTON 0.0058 1 0.0058 0.423 0.5290 RESTDUAL 0.1504 11 0.00137 TOTAL 0.1562 12 Figu?e 2

Standard Douiation ot IPO netrln and Mar*et lndex

Figur€ | lPrOMonthly neturn and llarket lnder Perlormance AveragePricePerformance AverageMarket Index !

0.25

0.15

0.5 o t

Month

OcroBER-NovEMBER 1995. THEAsrANMANAGER

Table 2

NUMBER O FC A S E S1: 3N U M B E R O FV A R I A B L E4S : Regression analysis for IPO roturn

INDEX 1 2 3 DEP.VAR.

NAME month indxret abnret iporet

MEAN 6.0000 0.0070 0.0248 0.0293

STD.DEV 3.8944 0.0254 0.0794 0.0926

VARIABLE; DEPENDENT iporet VAR. REGRESSION COEFFICIENT -0.0087 month 0.0813 CONSTANT

S T D .E R B O R 0.0067

T(DF=11) -1.299

PROB. o.22045

STD.ERROR OFESI = O.O9OO r S O U A R E=D0 . 1 3 3 0 r = -0.3645 ANALYSIS OF VABIANCE TABLE SOURCE S U MO FS O U A R E S REGRESSION .0137 RESIDUAL .0891 TOTAL .1028

D,F. MEANSOUARE 1 .0137 11 .0081 12

F RATIO 1.688

PROB. .2205

Table4

NUMBER O FC A S E S1;3N U M B E R O FV A R I A B L E3S : INDEX 1 2 DEP VAR.:

NAME month stdprice stdmkt

MEAN 6.0000 0.2398 0.'l'147

STD.DEV. 3.8944 0.1141 0.0452

DEPENDENT VARIABLE:stdmkt

VAR. month

REGRESSION COEFFICIENT STD.ERROR T { D F = 1 ) 0.0077 0.0026 2.966 CONSTANT 0.0684

PROB. 0.01284

STD.ERROR OFEST.= .0352 = .4443 r SOUARED r =.6666 ANALYSIS OF VARIANCE TABLE

S O U R C E S U MO FS O U A R E S REGRESSION O,O109 RESIDUAL 0.0136 TOTAL 0.0245

THEASIANMANAGER. OCTOBER-NoVEMBER 1995

D.F ,l '11 't2

MEANSOUARE 0.0109 0.0012

F RATIO 8.796

PROB. 0.0r28

BY PRoFESSoIt ETSUINABA

Trends in Employer-Sponsor Tlaining andDwelopment inthefuiaPacific Regron Inlroduclion With the liberalizationof economic a c t i v i t i e si n t h e A s i a - P a c i f ri ce g i o n ,i n cre,l5ing interactiun dmongenterprises in the region is expected.Enterprisesare thereforepreparingtomeet this challenge in variour wa) s, oneof r,,hich i: training and development of managersand empJoyes.Hor,'everapproaches andpriorities of enterp se training and development may be different,dependingon the situationsin eacheconomy. The Asia Pacific EconomicCooperation (APEC)Human ResourcesDevelopment BusinessManagement Netn'ork (HRD-BMN) has conducteda joint researchentitled "Emplover -Sponsored T r a i n i n ga n L lD e v e l o p m e ni tn t h e A s i r lar ific Rr:gion"in sir membereconomic,. Included in the studv are Australia, C a n a d aC. h i n e sIea i p e i l,a p a n M , al.rvsia. and the Philippines.The objectiveof the researchis to identifv currenttraininâ&#x201A;Źiand d e v e l o p m e n t p r , i c t i c e :i n t h e t d r g e t economiesand use these as possible benchmarks for organizations in the APEC economies.

Quality: A Corporair. Prioritt Qualitv improvement currently tops the corporateprioity lists ofmost economies in the studv Cost reduction is also seen as an immcdiate concern, pariicularly in large enterprisesAPEC. For the

Philippines, the dcvelopment of neu. productsfollorvsclualitvimprovementin terms ol lmportance. Japanis the onlv cconomvthat does not considerquaiitv improvementasone of its nost pressingconcems.lnstead,Ja-

PRESENT AUSTMLIA CANADA JAPAN MALAYSIA PHILIPPINES TAIPEI

First Priority

Second Priority

Quality Improvement DecreasingCostSbucture DecreasingCostStructure Quality Improvement QualityImprovement QualityImprovement

Decreasing Cost QualityImprovement Streamlining of business Reducing Cost Development of new products Rationalization of Production

FUTURE AUSTMLIA CANADA JAPAN MALAYSIA PHILIPPINES

QualityImprovement QualityImprovement Development of newproducts Quality Improvement QualityImprovement

TAIPEI

Quality Improvement

Development of newproducts Strategic Alliances QualityImprovement ReducingCost FormingStrategic Business Alliances Sheamlining of business

OCTOBEIT-NOVEMBER 1995 . THE AslAN MANAcFR

pan is morebotheredby the needto reducecostandby thepressure to streamlinebusiness. Bothconcerns areprobably due to the rapid appreciation of its currencv In the mediumterm,qualitvstill remains thetop prioritv for nearlvall corporations,exceptthoseftomJapan. Japaneseenterprises viewthedevelopment of new productsas their utmost pdoritv Nextinthelistarethefollowingconcerns: strategicalliancesfor Can-adaand the Philippines; streamliningof business for ChineseTaipeiandreductionof costsfor Malaysia,anddevelopingnew products (SeeTable1a) for Australianenterprises. Personnel Management Priorlly On issuesconcerning personnel manaSement,developedeconomiesregard personnelreshufflingbroughtaboutbv restructudng/down-sizing as their currenttopprio ty,whileMalavsia, thePhilippines,and Chine:e Taipeiperceive shortage ofskilledlaborandcostoflabor as their major concerns. An interesting differenceis thatJapan'ssecondpdoritv lies in reducingthe numberof work hours.Thismavbe reflectionof thepressureonJapanese corporations to shorten workinghours.(SeeTable1b)

PRESENT AUSTRALL{ CANADA ]APAN MALAYS1A PH1LIPPINES TAIPEI FUTURE AUSTRALiA

JAPAN MALAYSIA PHILIPPINES TAIPEI

Supporllvo Top Managemena The survevresultslrom top manag,ement re.pondentshavea positives attitude towards personneltraining and deTHEAsrANMANAGER. OcroBER-NovEMBER 1995

Second Prioriry

PeBonnelRestructuring Personnelreshufflingdue to restructuring/downsizing Personnelr€shuIflingdue to reshucturing/downsizing Shortageof skilled labor Compensation/Costof labor Shortageof skilled labcr

Compensation Compensation/Coetof Labor

Managementof diverse worKorce Managemmtof diverre workforce Managementof diverse worKorce Shortageof skilled labor Compensation/Costof Labor Compensation/Costof labor

CANADA

In five vears,the respondentsexpect that pdorities will shift to the management of a culturallydiver\e work force, particularly amongthe developedeconomies of Australia,Canada,and Japan. This may be attributed to migration into AustraliaandCanadaand theerpansion of their operationsoffshore.In Japan, labor mobilitv and internationalization are also maior concerns,reflectingthe acceleratedpaceof Japanesecompanies' internationaloperdtion\and lhe changing patternsof the enterpriseemployment system,allowing higher mobilitv of work force. For lessdevelopedeconomiessuchas the Philippinesand Malaysia,compensation and cost of labor and shortage of sLilledlaborremainthemostpressingissues,while ChineseTaipei will become more concernedabout the cost of labor and personnelstructuring.

First Priority

Hours of work Developm€ntof new products Compensation/CoetoI Labor Shortageof skilled labor Cortpenmtion/Coot oi tabor

Compensation Shortageof sklled labor labor mobdity/irtarntiouliz*ln Compensation /Coot of Labor Shortageof skilled labor Petsorud lEshu$iE/ns[ldnn€

Figure1

Management'sAttitude Towards PersonnelTrainingand Development

20 40 60

30 100 120

20 40 60

30 100 r20

Ie@,,yorss@ I &*

n |

20 40 60

30 r00 120

De,re.

,d,irs.sr I s@sry&@

tends In lhalning l& l)evelopmeni Sincetheserviceprovided Staffing by the Trainingand Develop(Percent) ment(T&D)departmentin efExpectedRateof TrainingStatf ls the Stalf Devotedto fectcreatesvalueto the other For NexlYear Trainingand HRDAdequate departmentswithin the organization,somehavestarted Austraiia to use a transfer-pricing mechanismto measurethe correspondingcosts.Respondentsfrom Australia (50%)andCanada(427o) use Japan thismechanismmoreextenMalaysia sively.In all othereconomies, Malaysia this practiceis not widespread.But in Malaysia,the Philippines is exuseof transfer-pricing Philippines pectedto bemorepopularin thefuhrre.(SeeFigure4.) Taipei Taipei A T& D departmentengagestheservices of consult120 0 30 60 90 antsor contractualstaffand Increase I same usesexternalinstitutionsas ! !""" !"o l"o on"*". NoAnswer oecreaseI altemativewaysto tapexperI tise.Whiletheseseruices are usedextensively in Australia and Canada,Asiancompaview employ- prisessurveyed,the numberof staff is velopment.Management to havevariedprefernies are observed eesas the most importantassetof the perceivedto be inadequate.This probMalaysia,andthe Chinese Taipei, ences. ad- lem is identified in ChineseTaipeiand companyandtherootof competitive rs J a p a n .I n C h i n e s e vantage.Althoughtop management not directlyinvolvedin makingdecisions T a i p e i , M a l a y s i a , Figure3 sup- and the Philippines, on training matters,it nevertheless and Control Future Structure al- nearlyhalf of the reportstheseactivitiesthroughresource location.Thisattitudeis particularlyevt- s p o n d e n t s e x p e c t In the numberof staff dentin lvfalaysia andthePhilippines. Australia t o i n c r e a s ei n t h e reand Chinese Taipei, however, Canada spondentsperceivetop management n e a r f u t u r e . H o w Canada supportto be slightlyweakerthan that ever,developedeco(See nomies as Aussuch observedin the other economies. tralia, Canada,and FigureI ) Japan Japando not expect i n a n y s i g n i f i c a n t lfodlcated lhalnlng Presenee The surveyrevealsthe presenceof crease. Malaysia (SeeFigure2). iraininganddevelopment dededicated A maiorpartmentin most enterprises. In terms of decihavea formal, ity of the respondents Philippines sion-making, wdtten trainingpolicy.Japanese enterJapan prisesareagainan exception. Only half and ChineseTaipei reporthavingformal,wdttenpolicieson expecttraining and Taipei training and development,despitethe developmentto befactthat the ma,odtyarelargecorpora- comea more decen60 80 0 2 0 4 0 tralized structurein tions. thefuture,while Canctrange ada and the Philipvs l)ecentrallzaCentrallzatlon lMore centralized INot pines beare split tlon: a l)llemma lMore Decentralizellto ln"*", While dedicatedtraining depart- tween the two strucmentsdo exist in most of the enter- tures.(SeeFigure3.)

Figure2

l995 . THEAsrANMANAcER OcroBER-NovEMBER

creasein nominalamountsto be earen up by inflation.(SeeFigure5.)

Figure2

Trainingand DevelopmentTrends

One to Tlvo Weeks of Thalnlng l)ays Are a Norm Asidefrom financialresources, time is anotherimportantresourcewhich needsto be allocatedfor the continurne trainingandeducation ofemployees. Althoughnot all respondents keeprecords ofthenumberofdaysof hainingfor their employees andmanagers, thesurveyresults are revealing.Mostcompanies are shown to conducttraining for about a weekon theaverage.ChineseTaipeiprovidesthelongesttrainingperiodfor production(29days)andservicegroups(20 days).Australia andCanadareflectfairly evendistdbutionof trainingdaysacross all categories.In Japan,executivesreceivelittletimeoff (2days)for haining, Philippineexecutives receivethelongest time off, over 10 days,in training.(See Table2)

Usetransfsrpricing/ chargebacks

Usoconsultanls or contraclstaft in TD

Use erlemal traininginstitute

Usetraingroups clasgiligdas teams Train-lhe-trainer approacn

100 Japan

lu"ay"i"

lenitppines

lru,*,

Leadershlp & Strateg;lc Plannlng as Top lhalnlng Needs Philippinespreferto useextemalinstihr- years.One-thirdof Australian,17%of Thesurveyidentifiesthecurentcrititions for training. Emphasisis the inho- Japanese, and55%of Canada's corpora- cal training and developmentneedsof ductionof grouphainingasa teamand tions are not optimistic about future ex- eachoccupational group.For the executhe train+he-trainer approaches.These pansionin training expendituresand tivelevel,leadershiptrainingfollowedby approachesareusedextensivelyin Aus- predicta reductionin the T&D budget. shategicplanningarecitedasmostcdtitralia,Canada, Malaysia,andthePhilip- This may be attributedto the recession calinAustralia,Canada, Japan,andMapines.Approximately half of the corpo- or restruchling in theseeconomies.In laysia.Themanagerial levelalsoshowed rationsin JapanandChineseTaipeialso Canada,corporationsexpectthat any rn- a similarsetof needs.In thePhilippines, use these.It is expectedthat theseapproacheswill becomemore popular Figure5 amongthe six economiesin the future.

Trainingand DevelopmentBudget

Growlng Tlalnlng Budgei Mostof therespondents haveabudget for haining anddevelopment.Thetrends in the size of T&D budget vary by economy.A majority of respondentsin Malaysia,Philippines,and Australia increasedtheir per capitaT&D budgetin the past and expectthe trendto continue. In Malaysiaand in Aushalia(from 1989to 1994),the governmentimplementeda levy to encouragetraining by ihe enterprises.Halfof therespondents in Canada and ChineseTaipei had increasedtheir budget.The sarneproportion expectthe hend to continue. Only Japanhad one-third of the corporationswhichhadincreased theirtraining budget,with a quarter of them having decreased their budgetin thepasttwo . OcroBER-NovEMBER THEAsrANMANAGER 1995

Ch6nO. h rhe I'an'ng Budg.l Mr lh. pa.l 2 y6ts

!r.**

lPar.ahrl " - --

Exp*râ&#x201A;Źd Trs'r'ng Budoer aorlhâ&#x201A;Ź ndr yer

f "o,"n*n" l*.,",* 37

planningiscitedasthetoP strategic priorityneedsof themiddle level. members,the For non-managerial identifiedtraining needsare customerservice,teamwork, qualitv improvement,and multi-skilling, in additionto their own professionalskill development.For the cresamegroupsin thePhilippines, cultureof continuatinga corporate ouslearningandtotalqualitymanagementwereincludedin the top threetrainingneeds.(SeeTable3.) For the future,the sameneeds are identifiedas important.Howwould evet seniorlocalexecutives put greateremphasison strategic will replanning.Otheremployees quire higherlevelsof professional skills and computerknowledge. Oneuniqueneedidentifiedby the respondentsfor profesJapanese peopleis "creasionalandtechnical

Au!ilr!llr

Excecutive Management Professional Salm Clerical Production Services Trade Technical/ Supervisory

1o be

MethodsUsedfor Evaluating TrainingActivities

Phllippines

Behavior l\,4ethod

M!l.v.i.

2.7

m.6 12.8 9.5 8.3

J.J

5.9 4.3

3.8 3.8

2.2

Philiooin..

Trhol

10.1

7."1

8.1 5.1 4.5 5.3 2

1't.6 4.9 10.2 29.'l 20.9

15.9

b.3

8.9 ,|o

11.1

27./

19.1 't2;l 11t

of trainingis Evaluating training programs is hardly Measuringeffectiveness important practicedby companiesin thesecompadifficult, but it is nevertheless in orderto enhance thelearningprocess. nies.lt cannotbe determined,however, Therearetypicallyfour tyPesof evalua- if this is due to the fact that evaluation ts tion methods:reaction,learning,beha- indeednot undertakenor the surveyinviot and result.Thereactionmethodis strument did not cover other forms of the5atis[ac- evaluation which these economiesuse. to determines to undertaken on thetrain- (SeeFigure 6.) ln any case,the reaction tionleveloI theparticipants

Figure6

I;:rsrI lil:",'."H"

Jrp.n

3.9 4.4 4.5 4.4

GeneralWorkere Skilled Semi-skilled Unskilled

tivity and ideas." This may be relatedto an earlier responsewhich showed new product developmentasa future business thrust in Japan.

Dffeetiveness of Trainlng Me.asured Mor"e Closely

C!n.da

8.4 10 123 "17.8

I r"*o: Mehoo

ing program. The learning method tries to measure any improvement of the level of knowledge and skills ofthe participantsafter training. The behavior rnethod is more complicated in the sensethat it typically takesa longer period to assessthe effect of the training on behavioral change.The result method tdes to measureeffectson the actual resultsin corporate performance which can be attributed to the training. Although a large number of companiessurveyed claim to use any of the above methods,only a small proportion of their training activitiesare actually evaluated.Only about 24% of training programs in the Philippines are evaluated.Japanand ChineseTaipei are exceptions.

method is the most widelv used among economiesin measudng training effectiveness.Other methods are not extensively used. In fact, only Malaysia uses the result method of measurement. {Dn.the-Job and In-House Semi. Mode nars are Preferrcd T h e p r e f e r r e dm o d e o f d e l i v e r i n g haining among the economiesis on-thejob. The emphasisgiven to on-the-job training versusoff-the-jobis strongestin Japan(87%).In ChineseTaipeiand Australia, one-third of respondentsstressoffthe-job.(SeeFigure 7.) In-houreseminarrare the most preferred modes of training for most of the respondents.Other modes included inhouse ceitification system and outside seminars. Alignlng T&ll wilh Business Goals as a Critieal Chellenge economies In lable 4. theparticipating haveranked their threemost criticalchallengesto improving their organizations. Most of the respondentsindicated aliSning haining with businessgoalsas most

1995. THEASIANMANACER OcroBER-NovEMBER

EmployeeGroup Australia

EXECUTIVE

MANACEMENT

Canada

Jaoan

Malavsia

1.Leadership l.Leadership 2.Strategic 2. Strategic Planning Planning 3. Gen.Mgt. 3.Managing Bus.Trends Changer

1.Leadership 2.Stntegic Thinking

ManageriaVProfessional 1.Strategic mgt./plan 1.Leadership/Motivational 2. Exec.careerdev't

1.Leadership 1.Leadership

L Strategy/ 1.StrateSic mgt./plan Bus.Planning 2. Exec.careerdev't 2. Human Technical/Supervisory 3. Teanbuilding ReowceDe/t 1.Mgt. andSupervisory Skills

2.Cen.Mgt 2. Mg. Change Bus.Trends 3.Interper3.Mgt. SupersonalSkills visorySkills

2. Mgt.andSupervisory Skills 3.Teambuilding 3.Strategic/Bus. Planning

PROFESSIONAL/ 1.Technical l.Technical 1.Professional TECHNICAL Skills Know & Skills Skills& Tech. 2. hterpe$onal 2.Interpe$onal 2.DevCost Skils Skils Reduction 3.Customer 3.Quality/ Service Cust.Service

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ClericaVSales Personnel 1.Prof.Salesmanship 1.Technical Skills(including marketingskills,acct. computerupgrade) accr.mgr. 2. TradesUpgrading/Multi- 2.Cultureof leaming skilling 3.TotalQuality/Continuous 3, TQM Improvement

1.Customer Service

1.Sales, NeSotiation Skills 2. Sales,/ 2.Quality/ ne8otiation Customer 3. Tohl Quality 3. Technical Cont.Impmve. Know.& Skills

2. Planning/ Proposition

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1.Technical 1.Effective Skills Progress 2.Quality/ 2. Technical Customer Service Skills

3. Team Building

3.Teamwork, Teambuilding

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1.Strategic Mgt.

l. Technical 1.Skll SKills Advancement 2. Quality/ Cont.Improve. 3.Teamwork, Teambuilding

1.Customer l. Quality/ se ice Customer 2. Technical 2. Technical Skills Skills 3.Total 3.Quality/ Continuous Qualit]' Cont.Improve. lmprov 1.MultiSkilling 2.Technical Skills 3.Team Building

1.Customer Satisfaction

Genenl Workers 1.Self-directed work 1.Technical Skills(including teams computerupgrade) 2.Computertraining 2.TradesUpgrading,/ Multi-Skilling 3.Teambuilding/Tearnwork3.Cultureof Learning

'l . Technical Skills 2.TQM 3.Cultureof Leaming 1.CustomerseNice 2.TQM 3.Cultureof leaming

1.Technical Skills 2.Trades Upgrade 3.quttyi Cont.Irnprov

THEAsrANMANACER. OcroBER-NovEMBER 1995

Otherimportantchalcriticalchallenge. lengeslistedincludeseniormanagement commitmentand the developmentof a learning. cultureof continuous/life-long Distanee Lâ&#x201A;Źarning in the Not Too Dlstant futule? Distancelearningrefercto teaching in whichtheinandIearning situations structorandthe studentsaregeographiThe instructionaldelivcallyseparated. ery cantaketheform of electronicdevices or audio/video suchas video cassettes conferencing, andpdntedmate als. Currently,more traditionaldistance with learningmediasuchaspdnt-based videoor audiocassettes aremostpopuTheproporlar with all therespondents. tion of usagerangesfroma low of 36%in Cdnadato a high of cl % in Malaysia. traincomputer based Anothermedium. particularly ing,is makingsomein-roads, (SeeTain MalaysiaandthePhilippines. ble 5.) Morehigh-techtrainingusingmultiare mediaandtwo waytele-conferencing prematurein thetraining still considered in all economies at thisstage.Many scene to see enterpdses, howevetareinterested how thesecan be incorporatedto their trainingactivities.Costand availability of thesetraininetoolswill determineac-

Critical Challenges 1.Seniormanagementcommitment 2. Cultureof continuouslife-longlearning 3. Culture of continuouslife-long learning i. Aligning haining with businessgoals CANADA 2. Seniormanagementcommitment 3. Developa culture of continuouslifelong learning 1.Aligning haining with businessgoals ]ATAN 2. Seniormanagementcommitrnent 3. Increaseresources-timg humanand financial MALAYSIA 1.Aligning haining with businessgoals 2. Seniormanagementcommitment 3. Developa culture of continuous/life long learning PHILIPPINES 1. Aligning haining with businessgoals 2. Developa cultureof continuous/life-longleaming 3. Seniormanagementcommitment TAIPEI 1.Aligning haining with businessgoals 2. EffectiveEvaluation 3. Seniormanasementcommitment Countries AUSTRALIA

on a hralusage.It would beinterestingto see possible,to cometo an agreement thatwouldform setofidenticalquestions how thesewill changein thefuhrre. thecommonsurveyinstrument.Instead, study teammembersagreedto focuson Ooncluslon Curent intemationalcomparisonsof capturingcomparableanswers(not idencorporatetrainingpoliciesand practices ticalquestions). Certainlyoneof the key findingsof are difficult to obtain and,for all intentsand the projectwas that the importanceof Figure7 are purposes,arequesnon- hainingand economicdevelopment Emphasison Modesof Training able.Instruments used undeniablycorrelated.In someof the to capturedata vary more "developed"economieslike Japan sloweconomic significantly-in terms andCanadaexperiencing Australia of definition,measure- growth, training thrustsarerelatedto rement and interpreta- deployrnent,personnelreshufflingand ln some "developing" tion-that thereis little costcontainment. valuein comparingre- APEC economieslike Malaysia,rapid growthis drivingfocuson skill economic sultsobtained. and entrenchByusinga common formation,development, approachin methodol- ment. In short, in economiesenjoying ogy, this research rapid economicgrowth,pdoritiesarein development. projectattemptedto traininSandmanagement This study also confirmsthat busrovercometheseshortfrom all APECreandeconomies comings,thus enhanc- nesses Malaysia ing the comparability gionssharemanyof thesamechallenges. of data. The project, In the trainingcontext,all participating in this proiectindicatedthat howevetwasnotwith- economies the number onechallengeto improving out its challenges. Taipei wasdligningtraintraining activities differtheir Given cultural goalsandshating with overall colporate as well as differences egy ences in economic structureand enterQuality improvementis a key corpopdse management,it ratepriorityof all counhiesexcePtJapan. wasdifficult,if not im- It is an issuethatis likely to bea signifi-

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l9c5 . THEASIANMANACER OcroBER-NovEVBER

cant driver of the need for haining in thefuture. Personnelrestructuring is a major personnel managementrssueat present in Australia, AUSTMUA CANADA JAPAI{ MALAYSIA PHILIPPINESTAIPEI Canada, and Japan. INUSE INUSE INUSE INUSE NUAE N USE Skilled labor shortages Print-basedmedia 40 are pressingand future 28.5 74.7 9't.3 50.8 U.4 video/audiocassettes concernsin Malaysia. Business television 2 ChineseTaipeiis also 4.4 13.6 8.7 10.3 29.6 Computer-based 11 18.6 concernedabout skill 20.4 47.8 n.5 14.8 haining shortages atpresent, and Computernetworking 1,6 thecostof laborin thefu9.9 10.9 26.-1 13.5 11.1 InteractiveCD 15 ture. Restructuringin 8 3.2 4.3 6.4 0 ROM/laserdisk some countlres may Videoconferencing 8 presentopportunitiesfor 5.8 8.1 1.6 1.2 two-way interachve a transfer of skilled video workersto meettheskill Videoconferencing, 2 needsof othercountdes. 4.7 3.2 4.3 3.2 2.s one-way video,two Management of a diway audio versework forceis idenAudio conferencing 74 tified asa future pdoriiy 8.0 6.3 4.3 1.8 43.2 (graphics),telephone in Australia,Canada, teaching andJapan.As theAPEC region liberalizes its trade and investment, the need to effectively managediverseworkforceswill beeven will forcetrainingtowardsthe mostef- parisonsoffermoredemandingpoints of morekeenlyfelt. fectiveways,within the shortesttimes. companson. Thenumberof daysspentin haining Transfer pricingmechanisms maybeone Clearly,opportunitiesexistfor more appearshighin Australia,Malaysia,and of thewaysto forcetheenterpriseandhu- researchto bedonefocusingon theseand ChineseTaipeiamongthe otherAPEC man resourcedepartmentto carry out otherareasin an attemptto shareour reeconomies suweyed.Thedata,however, theirtaskmosteffectively, includingout- spectivebestpractices in trainingasecoarenot reliabledueto thedifferentways sourcing training and investing in elec- nomic integrationamongAPECeconothequestionwasinterpreted.AIso,modes honicmedia. miesmovescloserto a reality. of hainin& eitheron-the-jobor off-the-job, Theresultsof thisstudysuggestthat may be related to the outcomeof the internationalcomparisons, while diffinumberof trainingdays.It is, of course, cult to makewith accuracy, offera valumorediffifulttomeasure on-the-iob train- ablebenchmarkfor assessing perform- Ptof. EtsuI obsholdslhe Fuii XercrFou d1tionPrcing in thisform.Developing a compara- ance.Yearby yearenterp se of nation- lessorialChnirofToLalQualil! Mtnagemerlt.Herarcas Ispa esema agefienlpractices, ble measuremay be one of the areas ally specificdatahighlightonly someas- ol specialtyinclude cross-cult nl, joitll I)enturc andlechnologV tnnsfer whichwill contributeto thebench-mark- pectsof performance. International coming andstandardizing of humanresource development. Althoughthe resultsdid ResearchBackground: not show the trends clearly at this stage,new developTitle of Research:Employer-Sponsored Trainingand Developmentin the Asia PacificRegion. mentsin T&D areasmay deWhenConducted:"194,4 velop.Forexample, modesof ParfnersrConferenceBoardof Canada,SanwaResearchInstitute 0apan),ResearchInstitute for Asiaandthe Pacfic{RIAP),Universig of Sydney(Aushalia),NationaI PrcductivityCenter(Iaipei), trainingdelivery,evaluation and Asian Instituteof Management(Philippines), of effectiveness of trainingsas Bief Methodology:Atotal 6243questionnairesweresentand 1,285!â&#x201A;Źsponsâ&#x201A;Źsweresentobtained well as the contentsof the within the six economies.The responseratesfor the survey in eacheconomyvaried frorn 12.6to trainingareexpectedto bethe 32.4%.The sampleswere drawn on a random basisfrom a population of eacheconomy'slargest majorchallenges for thetrainenterpdses. ing anddevelopment section of theenterprise.Thefastpace For a completeresearchpapet contactthe author. of economicdevelopment . OcroBER-NovEMBER THEAsrANMANAGER 1995

FRANCISCO L. ROMAN,JR. BY PROFESSoR ANDHAZELSANGALANG

Forecasting theFuture (PartI of III) Desk he SystemCompetitiveness planningasa toolto usesscenario generatealtematefutureson issuesor to providedifferentpolicyproposals,ratherthan to specifyone possible outcomefrom an analysis. qualiplanningis essentially Scenario tativein its approachand structure.For purposesof theDesk,howevetit is necessarytoundertakequantilativescenario planning:to evaluatethe economicconsequences of a policy decision,and to stimulatethe impact of severalpolicy decisions,or combinationsthermf,on the economyor on affectedstakeholders. ThedeskusesapmgramcdledStella@, to generating which is highly amenable The software is quantitativescenarios. a model-buildingtool which essentially providesnonlinearsimulations.It has user-friendly menus,is visually-oriented of graphsandcharts, with anabundance andrequiresonly basicalgebra, We suggestto corporateexecutives and governmentpo)icymakersthat a of shatmuchmoreinformeddiscussion egiesand policiescantakeplaceby using a tool like Stella.Thequotationsand chartsin this articleare extracted,with the company'swritten consent,from Stella'soperatingmanualand software Thedeskusestheprogram,but package. on it is neither promoting the sofh.^r'are nor is it comparbehalfof the company, ing Stellawith other programsin the market.

twiddleafewnumup theirspreadsheets, bers,and diligently suckerthemselves the into thinkingthatthey'reforecasting future...lntruth, number crunching is like computationally [spreadsheets] pumpingiron:Youbulk up on databut do virtuallynothingfor your conceptual quickness or flexibility.lt'sanintellectual exercisethat stretchesthe fingersmore than the mind. You can't understand risk-let alonemanageor reduceit-by Youneed crammingit intoa spreadsheet. techniques thatletyoucreativelyexplore risk andvivisectit . Oneof thebesttechniquesfor doing so is generatingscenarios:lnstead of twiddlingthenumbers, twiddlethefundamentalassumptions. Thequantitative approach of scenario planningallows for the almostunrestrictedmanipulationof variables,assumptions. and inputs,to makeprojectionsaboutthefuture.A keyconcemfor the imPact any policymakeris to assess of a policydecision.ln otherwords,the policy makermust peerinto the future. managersand bureaucrats measures, suchas,"Whatif raw material In essence, "whatif a must"twiddlethefundamental assumpcostsgo up by five percent"or tetheresultsof decisions by 15 tions"tosimuld cunencydepreciates or appreciates andthusarriveat altematefuturesbased percent?"and soon. If properlyused,numbers give the on thedecisions. decision-maker thedatacrucialto evaluof differentac- Vignette: Prey and Predator ating the consequences The Stellaprogramcontainssimulations.Butnumberscanalsocreatethefoltrapthatmanagers all tionson inventorycycles,stressbehavior lowingintellectual by sfudentsin a semestetand evenan toooftenfall into: modelfor diabetics. boot insulinmanagement Everyday,millionsof managers Sensltivity ls. Scenario Thequantitative to scenario approach to planningis intendedasa counterpoint the prevailingand popular practiceof managers who usespreadsheets for torecastsespeciallyto generatesensitivity analysis.Sensitivityanalysisoftenmasit asksa queradesasa scenariobecause similarquestion-"Whatif...(thisor that occurs)?" However, thismodeof sensitivity analysesfocuseson numerical

Numbuaunching islihepumpingiron; Youbulkupondata butdanothingfor

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1995. THEASIANMANAGER OCToBER-NOVEMBER

Thefollowingcasevignetteis basedon a file entitledPopulationDynamics. Considerthe followingscenario: An is in a steadystate.Thepredaecosystem tor (mountainlions)eat the prey (deer) which in turn eatvegetation. Bothspeciesultimately serveto fertilizethevegetation.All in all, we havea stableenvrronmentnot too far removedfrom the movie "The Lion King." Now assume enroachment, by maninto thisenvironmentperhapsasa resultof themountarn lion making off with farm animals,or evenmaulinga humanbeing. Evidence of theabovescenario is capturedin Newsweek's accountof thefollowing event (Andrew Murr, "Lions Ioosein theBackyard Mar ," Naosweek,2T 1995,p.33.): Late one nightat Chul Yoon'sLa Crescentahomenortheastof LosAngeles,a mountainlion materialized beside poolandmauledYoon's80hisswimming poundAkita.Yoonsprayedthecougarwilh a gradenhose;unfazed, thepowerfullion jaws clenched thedogin its andleaptover a four-tootwall.lt was the lion'ssecond suburbansnackin a week.Sixdaysearlier, the cougarhad killeda German shepherd...lncreased competition fortood has drivensomeinto long-held human country.Younglions especially, tend to roamtowardsuburbia-dogsare easier

1: DeerPopulataon

preythandeer...Last year,rangersshot and killeda cougarthal had invadeda shoppingcenterin Montclair, eastof Los Angeles.InSanDiegoCounty,lionshave beentrappedneara retirement complex andspottedatan elementary school.Anothercrashedthoughone house'swindowwhilechasinga rabbitin Ramona. Oneresponse is to placea bountyon the predator Figure 1 simulatesthe effectsof an annualUS$50bounty from 1900to 1940on a landareaof 1,000hectarescontaininga populationof 5,000 headof deerand 3,000mountainlions. Note to the reader:As you observethe graph,do not be concernedaboutthe scales,sinceeachis different.Simply shrdythepattemof theelements. Using this specialsimulation,the graphicsimulationof the scenariooffers interestinglessons: . Thebehavioris nonlinearand dynamic.Thereis no "straight-line trend." Thepredators,althoughsubjectto theannual bounty,struggleto survive,before in effectbeingwipedout (ofthegraphat Ieast),afterapproximately 15years. . Presumabltwell meaningbureaucratsor policymakersdid not intendto endanger or eliminateaspecies; theiroperatingassumptionprobablywas that therewere"too many" predatorsand a bountvwasneededto reducetheir num-

2: Vegâ&#x201A;Źtation

bersto someundetermined andundeterminable"safe" number.Presumablvit wastoo lateto sdvethecunentpredator population by thetimethatthewell-meaning officialsrealizedthattheimpactofthe annualbountywasthenear-extinction of thepredator. . The predatorgraph also demonstratesthe unintendedconsequences of thepoliry whichoftenbecomes an overriding or "blanket" approachto a problem. For instance,it is possiblethat the attackson livestock(or people)werethe resultof oneor only a few predatorsroaming nearthe affectedareas.Thereis also the possibilitythat media attentionexpandedthe issuedisproportionately. In any event,a bountyoffersa "policy" to thepmple,anda "policy" is alwaysclearer andmorevisibleto thevoting public than, for instance,instructionsto professional huntersto track down a specific"maneatinglion." In this scenario,the entire predatorpopulationpaid thepriceof actionsfrom presumably a few "deviants." . The graph of the remaining two populations-preyand vegetation--display a classicpattemof "overshootand collapse." Thiscaseincludescorollaryoscillations:"paired" (two populations), lagged(non-simultaneous), andaltemating (between deerandvegetation). . Oncethe predatorsare effectively

3: Prâ&#x201A;ŹdatorPooulation

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9:00 PM 4/25195

FigureI THEAsrA\ MANAcER. OcroBER-NoVEVBER 1995

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Figure2 morevariables eliminatedfrom the ecosystem, the pre- setsof costs:it paid off thebountyhunt- oneoption,andtherefore futuresto viousprey arenow freeto grow at will, ersto eliminatethe predators, and it, or to simulate,andmorealternate Evenin thissimple,three-variandtheyconsumethevegetationandpas- the ranchersand farmers,mustperiodi- consider. turelandto thepointthat,in a givenarea, callyspendto revitalizeat leastthatpad ablemodel,the policy makerhas four asidefrom thelandcannotsustainthedeer;vegeta- of thelandthatis theopengrazingarea. otherva ablesto manipulate, tion dropsprecipitously, followedby the Moreover,thereare presumablyother settinga bounty: r Reintroduce Vegeta- losses in termsof decreased bio-diversiry predator: Ifthe producdeer,whichdie fromstarvation. The valueof the scenariolies in un- tiondropsbelowdesirable levels,youcan tionthenregenerates, thedeerpopulation cyclerepeats derstandingthe interconnections of dif- repopulatethe area.(Basedon the data, expands, andthe(nonlinear) itself. ferentelements of thesystem.Inthiscase, onecanphysicallytranspose up to 3,000 But mountainlions.) Theovershoot andcollapse cyclepre- onlythreevariableswereconsidered. . Deertags:Deertagsare a euphesys- the interactionis clear.Thus,a specific vailsin bothbiologicalandeconomic deerdo tems.The classicexamplein economics policydirectedat predatorshas unin- mism for bounties;apparently, notmerita "bounty."Instead, huntingliis the hog-corncycle:an increasedde- tendedeffectson preyandpasture. in the in hind- censes areissued"tagging"the number mandfor hogsproducesan increase Other"systemrelationships," demandfor corn to feedthe hogs.This sight,readilycometo mind. Changesin of deerthatcanbe shotin a year. o Reintroduce deer:If thedeerpopuincrease in demandfor both goods en- thepriceof steelwill affectautomobiles; courageshogproducersand cornfarm- a devaluationwill changethe competi- Iationfallsbelowdesirablelevels,either of the ofbothexporfand importindus- because of thedeertagsor because ersto expandsupplyto Betgreatersales tiveness ofvegetation, onecanrepopulate andthusprofits.lncreased supply,how- tries; a labor strike will raisematerial collapse can ever, alsodrives down pricesbecause costsin othercompanies andindustries; the areawith deer (Theecosystem supportup to 5,000deer.) demandwouldbelessthanthenewlevel andsoon. . Clearland:Onecanseethe impact of supply.This"overshoot"periodof sup[n ply goesdown asfarmersopt to reduce Policy ls Nol "Dllher Or" ofchanginglandusein theecosystem. "populations" legislation only respective The core lesson of Figure 1 is that is this situation, assorted their supplies or of up to 100hectares to drive the pricesback up. This "col- difficult to imaginethe impactor out- allowstheclearance lapse"eventuallybecomes lessthancur- comesof a decisionon the affected of landper year Notethateachpolicyvariablecanbe rent demand,and thus allowspdcesto populations.As human beings,policy go backto pre-"overshoot"levels.The rnakerstend to think in static,linear,ei- adjustedquantitatively,upwards or that is, consequences will downwardsas well as throughtimecycleoccursnot only in agribusiness ther-or-terms; good results will products; theconstruction andairlinein- eitherbe or bad, either everyyear,oncein threeor four years,or with be probably not a com- policiescan be kept unchangedover a dustries,for differentreasonsand up or down,but 100-yrperiod. differenttime lags,go throughsimilar binationof both. Thereis a second,moreimportant,lesThe abovepolicy variablespresume cycles. policy more than consciouspolicy makNotethatthegovernmentincurstwo son: makersoftenhave environmentally 44

1995. THEAsrANMANACER OcroBER-NovEMBER

ers.That is, if the predator and the prey weredeemedirrelevant,then the simplest solution would be to eliminate both spe"hucies,and then to managethelandfor man" needs-livestock pasture,tounsm forestpreserue,urban development,etc. The final lessonin forecastingthe future is that it is difficult to return to an

odginalsteadystateonceit has Thislessonis imbeendishlrbed. portant in both ecologyand economies. All toooften,a policy is deemeda failure,andattempts to rectifythe effectsimply a desire to return to originalconditions,the "goodold days."This is easiersaidthandone. In thescenario underconsidis reeration,annualintervention quiredover a periodof time to achieveanythingneartheoriginal steadystate.Figure2 begins with $50bounty in 1900,and showsa similaroutcomewith Figure1 until 1910,when environmentalistsattemptto attain thesteadystateequilibrium.Beginning1910therefore, a seriesof one-totwo-yearvariablechanges deerby aremade.Reinhoducing 5,000headeveryyeareliminates the natural overshootand collapsebehaviorof thispopulation. Howevet it suryivesat a much reducedrate.Meanwhilethevegetationcoverisalsostabilizedby therelatively' stabledeerpopulanon. Reintroducin8 themaximum numberofallowablepredators as well aswithdrawingthebounty entirelyin 1920allows thepredator populationto shootup beyondthelimitsofthegraph.Only by reintroducingthe bounty to the maximum$100in 1932will the predatorpopulation drop. The predatorpopulation'sbehavior is greatlydependenton the presenceor absenceof the bounty.Between 1932to1940, the predatorpopulationriseswhenevertheboun$ is removed,and drops whenever the bounty is reintroduced.

wayof dealingwith uncertainty. Thereis tions,whichthedecisionmakercanalter no singleoutcomefor thefuhrre,because in thepresent. the future has not yet happened,and is Efic titt Dircchtrof lhe lhereforethe futureis alwaysuncertain. P\t. FnnciscoL. Ro'7,atr Thequantitativescenariotriesto reduce uncertainty formanagers andpolicymak- HazelSanldlantis Pjlirv Atnlus! ol theNM P'liy ersby offeringglimpsesof alternatefu- Forumantl Associate Editorof SCOPE(SystentCom O.casionaL PflFrstr Editorirls). turesbasedon fundamentalassump- l1(lili1)ol,ss

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4ll

B r S r n o u uK u u L L e n

Traders or Entrepreneurs: WhyLaboris a Competitiveness Issuein thePost-GAfTWorld is usually ountrycompetitiveness viewed from an industry perspectivewith industrial strucand anti-trust measderegulation ture, Laborin this dominantthemes. uresasthe desideratum-an perspective becomes a "input" ratherthana resource. Theonly in the agenda timelaborforcesit.elfon and this paradigmis when it unionizes a nuisance.Then,of course,it becomes needsto be placatedwith appropdate soothingnoisescontainingHuman ResourceDevelopment(HRD)and lndus(lR)platitudes.ThePhiliptrialRelations pinesis an exampleof one suchlaborabundanteconomywherea conjunction a segmented of high unemployment, labormarket,anda small(thoughvocal) organizedsectorhavepushedlaborasa issueto thebackburner competitiveness But this situationis likely to change dramaticallyin the comingyears.The new multilateraltrade regimeand the Orentryintoforceof theWorldTrading ganization(WTO)will setin motiona semeasures to harmonize riesofadjustment nationalpoliciesand laws with WTO in thePhilCoincidentally, commitments. meshwell ippinecontext,thesemeasures with thepolicyreformprogramdesigned stability and long for macroeconomic

beingimpletermindustrialrestructuring sincethe80s. mentedby thegovernment Thesepolicyreformsaimto promotegloanda greaterdegree balcompetitiveness of opennessin trade and investment. Among other things, they involve a

greaterexposureof the countryto internationaltradethroughfewercontrolson importsand exportsand tariffs,foreign andforeignexchange. directinvestment, with thenewworld tradIn conjunction is ing regime,thispoliry reformpackage

Chart 1 Sharein World Marketfor Manufacturesof the Malaysia Thailand,lndonesia, Philippines, (total manufacturedexportsas a percentageof total world manulacturedexpons) 0.9

0.8

Philippines Thailand

o.1

Indonesia Malaysia

0.6-

0.3-

0.2

0.1 10

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

OcloBtR-NovfvErRlqq5. THI A5lA\ MANAGER

expectedto result in fastergrowth of Chart2A RealDailyWagesand Productivityfor Agriculture manufacfu redexpods.Govenmentestiand Industry matesput thisfigureatanadditionalP2.2 to2.7Beveryyear,whileemploymentopportunitieshavea potentialto reach 700,000-800,000 annuallyby 2000A.D. Thereare two aspectsto the present situation.Thepositiveoneinvolvestaking advantage of theopportunities being openedup andthenegativeoneinvolves mitigatingits threats.In governmentspeak,the latteris called"adjustmentof industrieswhich grew under protective bariers to theirmoreefficientlevels."In otherwords,downsizing, resulting in retrenchment, layoffs,andclosures. On the otherhand,takingadvantageof opportunitiesinvolvesa morecomplextaskof identifying c o m p e t i t i vaed v a n t a gien 5static and dynamic terms. It means proactiveinitiativesfor positioningthe AgriculturalProductivity countryfavorablyin the world market. In thelanguageof business,it meansde0cidingto becomeentrepreneurs, andnot 70 '11 12 73 J.a 75 76 17 7A 79 80 81 82 83 84 85 86 87 8a 89 90 9l traden,in thenextcentury Notâ&#x201A;Ź: The wage figures are daiiy w6ges in 1978pesos. Productiviry is detined as sectoratvalue added in 1978 constant pesos peremployee peryear These meas!res arerhen divided by 4 tor scating purpopes. Whatis the levelof countrypreparSource: Nalional IncomeAccounts; 1991 PhitipoineStaristicatyearbook. ednessto takeon thischallenge? Whatrs theperspective of government agencies output. tifiesto its inherentquality.However, vestedwith the responsibility of formu- growfasterthanoveralldomestic lating policy for the adjustmentperiod Forthisto happen,a seriesofdirectlearn- policyintenentionsdirectlyin the form haveto takeplace,which of minimumwagelegislationand indiand beyond?What shouldbe the con- ing processes cernsof management and laborevenas are different from those that occur rectlyin theform of creditandexchange sales. Someof theseare ratepolicieshavedrivenup realwages. the adjustmentresultsin the inevitable throughdomestic strict adherenceto delivery schedules, Wagedifferentialsbetweenskilled and shakeout? requirements, and unskilledlaborarecompressed. ProducThe basicfeaturesunderlyingcom- stringentspecification with highfixedcosts tivity levelshavedeclinedandunit labor petitiveness arequality,cost,and deliv- marketingchannels dreoneof thehighestin theregion. ery Studies.have notedthat the Philip- for entry.On datethe Philippineslags co5ts pines appearsto do bestin situatrons behindThailandin itsshareof worldmar- (Chart2A & B). Laborratingsin selected (Chart1) Asiancountdesindicatethat unskilled wherequantitydemandedof the prod- ketsin manufactures. Thelabormarkethascontdbutedto laborcostsexceedprevailingcostsin uct is risingbut qualityis not undergoTra- China,Indonesia, ThailandandVietnam. ingsignificant changes: forerample, gar- thelossof countrycompetitivene5s. with a well- edu- (Chart3). mentsof particulartypes.However,in ditionally associated laborforce,FiliIn termsofstrategy thisseems to sugproducts wherequantity demanded is in- cated,English-speaking tes- gestthattheeconomyhasa comparative creasing slowly,but gainsareto bemade pinolabor'sgreatdemandoverseas by improvingqualityandprice(e.g.shoes andbags)andin caseswhereincrease in quantitydemandedchanges areaccom(e.9.Microelecpaniedby qualitychanges honics),it hasnot beenpossiblefor the (ratioof averagePhilippinemanufacturingwages to that of competitors) Philippines toimprovemarketshare. One ofthe reasons for thissituationis thatthe Country 1970 1975 1980 1985 1986 1987 1988 '1989 Philippineslacksa diversifiedexport portfolio.Theexperience of othercounThailand 0.77 0.42 0.30 0.32 0.33 n.a n.a n.a triesin theregionindicates thatsustained Korea 1.09 0.80 0.39 0.36 0.35 0.35 0.32 0.32 exportBrowthrequiresperiodsof speMalaysia 0.84 0.65 0.54 0.41 0.4:, 0.53 0.69 0.77 lndonesia n.a, n.a. cialization, alternating with periodsofdi1.37 n.a. 2.12 2.37 n.a. vercification. Moreovetto increase country sharein world markets,exportsmust Chart 28

t ".,*11""

THEAS]ANMANAGER. OCToBER-NOVEMBER 1995

wages)and, in ceptmarketdetermined turn, enhancedsavingsandinvestment out of retainedearningsleadsto sustainedlabordemand.In thePhilippine lvlanaoerialLabor ProductionLabor c a s et,h eh i s t o r i c aclo n j u n c t i oonI i m O A C Total o A c p o r t s u b s t i t u t i n gm a n u f a c t u r ea n d 1 10 3 1 Philippines 3 1 2 policy interventions in the labormar10 10 r 2a 1 China 5 ' 1 ' 10 1 10 40 1 10 8 ket haveled to a capital-intensive Hong Kong 1 0 1 0 2 2 9 lndonesia 5 1 1 manufacturingsectoron onehand,and 't 't 'r0 10 10 1 33 Japan t h e e \ p o r l o f h u m a ne n d o w m e n tisn 5 5 5 2 4 Malaysia form of OverseasContractWorkthe 1 1 0 8 3 8 1 10 8 Singapore 1 8 7 5 1 0 9 4 0 South Korea ers(OCWs),on the other. 1 8 9 3 8 1 9 8 Taiwan perspective on some Thegovernment (China) reflected in the lnterthese issues is of '10 10 4 31 Thailand 4 2 1 "ThePhilippines in WTO: report Agency 1 21 10 5 Vietnam 3 1 ' ] MakingtheFilipinoto Win" whichcomN o l e :O = O u a l i t l t ; A = A v a i l a b i l i l y ; C = C o s r 1 = the hiqhestgradepossibie;5 = thq averagegrade; 10= the lowesl {gradepossible), prisesthe Action Planof sevendepartLtd. Source:Political& EconomcFisk Consultano,/ whoareaffected by mentsof Bovemment Theyconsist the CATT-URAgreements. legislative measof threesetsofmeasures: with laws Philippine costadvantagein industrieswhich em- based, labor-intensivemanufactures. uresto harmonize and and Their outward orientation imposed commitments,executiveissuances ploy high-quality professional, measures to other support managerialpersonnel.However,this costdiscipline.In order to remaincom- actions,and productivity global competiand jump from the existingexportprofileof petitive, they had to be open to tech- enhance acrosstheeconomy. low-wage,labor-intensive exportsto ex- n o l o g y u p g r a d i n g .I n t h e E a s tA s i a n tiveness "miracle" Thesemeasures areestimatedto cost countriesthis was accompaport-orientedindushiesrequiringskill B for the pe od 1995intensitydoesnothavemanyprecedents n i e d b y a h i g h d e g r e eo f h u m a n c a p i - a total of P127.90 (Chart 4) in therecentpast.Addedto this,govern- t a l a c c u m u l a t i o nw h i c h p r o v i d e d a 1998. A nationalendeavorof this magnimentpolicywhich seeksto exportthese supply of skilled, educated labor. In Sofar,this has tuderequiresdiscussion. laborskills to shoreup its balanceand fact, these countries are responsible for "vicious circle" of povfocusedon the costsof the adjustment payments meansthatdomesticavailabil- redefining the "virtuous process.The public outcry has rightly erty into the cycle" of human is depleted. ity of suchresources The structuralchangesunderway capitalaccumulationas a growth strat- beenin the natureof howlsof hurt and "virtuous circle" concept goes painon behalfof vulnerablegroupsand will changethe patternof industrial egy.The manufactureand, in the process,the s o m e t h i n gl j k e t h i s :h u m a nc a p i t a la c - sectors.Much lessattentionhasbeen opportunitiesand the pattern of labor demand.It is well- cumulation frees resourcesto invest in paid to assessing documdnted that countrieswhich fol- improving quality of skill and educa- stepsrequiredto join the ranks of the NICs by the year 2000which needsfogrowthin tion; better educated workers perform export-led lowedaggressive, the80sstimulateda demandfor skill- better,(and in the EastAsian case,ac- cus from businessand labor groups. Theymustpay attentionto laborissues of a mediumandlongtermnature,rather than the short term palliativeslike collectivebargainingwith Unions.Someof (in millions pesos) theseissuesare skill developmentfor meetingthedemandsof newlycompetiTOTAL 1995 1996-1998 AGENCY ALLOCATION mechanewparticipatory tiveindustries, ftom the productivity nisms to enhance 72,922.00 34,262.00 18,660.00 Agriculture 34,336.25 1,939.64 32,396.61 Education shopfloor upwards,andevolvingways 1,859.00 2,359.00 500.00 Labor& Employment profits to sharbthegainsfrom increased 152.00 330.90 178.90 Health Creatlabor and management. between 479.05 1 , 1 6 1 . 5 7 lrade & Industry 12.996.11 9,938.87 & Technology 3,057.84 Science ing exportwinnersinvolvesa shared & Natural Environment t ,a n a g e mi s s i o nd m o n gg o v e r n m e nm 3,191.10 2,821.00 970.70 Reso!rces ment,and laborto competeand win tn 127,898.13 100,058.23 27,839.90 GRAND TOTAL thecomingdecade. SAVINGSANO BESEFVES, FUNDINGSOURCES:GAA,GRANTS,MINIMUM ACCESSREVENUES,APT PAOCEEDS, PRIVATE SECTOFFUNDING INTEF AGENCY COMMITTEE, TO WlN, THE GATT-UR lN WTO:MOVING-rHEFILIPINO SOURCE:THEPHILIPPINES

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

1995. THEASIANMANACER OCTOBER-NOVEMBER

n 1087,AIM conducteda J c o u p l e o f m an a g e m e nt I I d e v e l o p m e n tp r o g r am s for Acer (then known as Multitech) in Taipei.As one of the professors teaching in thoseprograms,I learnedthat Acer salcs then did not even reach $200 M, yet they were targeting for a billion dollars in salesby 1991. It was difficult not to be skepticalat that time sincethe high salestarget meant that Acer had to competehead on with the PC giants of the world. Furthermore, no amount of trend analysiswill result in a billion dollar sales forecastfrom the low basefigure given. hr 1991,Acer salesreached "l $986M. Beforevou say told you so," let rne remind you that $986M is much, much biggerthan $14M. So what's a safe enough but ambitious target for 1994?Two billion dollars?Wrong again,because Acer saleslast year hit $3.22 B. For the current year, how a b o u t $ 4 B ? C h a n c e sa r e , you're "Out!" on Strike Three becausetheAcer forecastsales revenuefor 1995is $5 B. What is Acer's magic formula?Clearl,v,the measurable long-term objective helped provide a clearcuttarget.Also, the company had a proper read of the ever-changingIT environment. More importantl, howevet the strategies that Acer implemented meshedperfectlywith current and emerging IT scenarios. In a recenttalk at AIM by Mr Stan Shih, Chairman and CEO of the Acer Croup, he pinpointed three winning strategies,namely,the Fastfood BusinessModel, ClientServcrOrganizationStructure, and Clobal Brand, Local Touch. Noting that the IT industry is curently in the midst of a major transition where the

article, The C Alphabef, this representsa quantum leap in the leadership continuum, which usually results in higher effectivenessand efficiency. Common knowledge tells us that traditional Chinese managementmeansa highlycentralized otganization. What Acer hasdone is a paradigm shift in management.To highlight this point, the Acer CEO emphasized"l'm willing to lose control than lose money." In a conversation with Mrs. Shih,shementioned an old Chinesesaving where one hasto first givebeforeone can lecelve. As a longterm objective, Acer has a "21 in 21" goal,that is, it is targetting for 21 pubIiclyJisted companiesby the start of the 21st century This is "walk the talk" in action. On the Client-Server OrAcer has recently put up ganization Structure,there is the only other motherboard a focusedmanagementin each plant outside of Taiwan in businessunit (client),while a Subic, Philippines. It is renetwork relationshipbetween markable that it took Acer Acer branchesworld-wide is only 57days to convert an old establishedfor speedand cost American warehouse into a effectiveness. working plant. From a The most interestingstrat- present output of30,000units egv is the Clobal Brand,Local over the past two months, the Touch.To Mr. Shih, localized plant expects an output of products,localassembly,local 200,000units per month early management,local ownernext year, and ultimately a ship, and local shareholder long-term goal of 10 M units majorities mean long-term a year Production output for leadershipin the market. Unnext year is estimatedto be like the stereotypeconceptof worth $200 M, while for the decentralizationwhere the year 2000 the Subic target is parentcompanystill owns the $ 1B . variousbusinessunits, decenBy the way, the Acer tralization in this casemeans Croup aims to be a $ 10 B ownership. In my previous company by the year 2000. Don't doubt. You just gotta believe.

'.tdlosecontroli

move is from an integrated, single-vendorpackagedcomputing solutionsto an open standard-based,more competitive and disintegrated mode of business,Mr. Shih believedthat it is at the beginning (designingand manufacturing)and the end (distributing) of the processwhere the real value-addedactivitiesoccur.Speedand cost,therefore, become crucial for competit i v e n e s s ,s o t h e F a s t f o o d Model becomesappropdate. One key feature of this strategv is the shifting of assembly from Taiwan to the marketplace, where inventory costs are reduced and a shorter time to market the products is achieved.

It n in designing,

manufacturing and distributingwhae therealualue-added actiaities occur.

THEAslAN MANACER. OcroBER-NovEMBER 1995

Tht AsianManagtr uill ptittt ML Slm Shihs altil. on hii FnstfoodBrc)ness

at thetop is a oneliness commonproblemfor CEOs.Theylosetheir make distortedbusiness skills, their decisions,and estrange own personallives.Let'sexplorehow this happensand if therearewaysout of this trap. A normalpart of CEOs' themroutinesis to disengage selvesfromdav{o-dayoperations.Theyhand over their to VicePresiresponsibilities dents,because"Presidents don't minglewith common folks."Thisis a dnagerous assumption,andthefirststepin losing touch with the real world.ln theguiseof "successionplanning"thecompany's bankers andboardofdirectors thismove.Secretades a divorce.Now theCEOs'deendorse begin censoring,cutting out structionis complete, perconany new person trying to ally and professionally. How reachthe CEO."Keepbusy" y o u m a n a g es u c c e s iss a s schedules of ceremonialand mucha challenge ashow you PRtasksareprepared,to give getthere. CEOS theimpression thatthey How canCEOsavoidthis of their de- d e s t r u c t i o n ?P r e s e n td a y arebusy.Because tachmentthe CEOs'day-to- "right sizing" reducesthe day skills begin to atrophy. numberof management layThedecisions theCEOpartici- ers,and forcesCEOsto keep patesin arebased on long-ago in touch.E-mailmakesit easy without bearing for far-flungoperations experiences to acCEOs cessCEOsasif theywerenext to today'senvironment. couldVerywellbesetup with door AnyGEemployee canebad information, for which mailJackWelch,for example. they no longer have the Fax technology has "touch" to makegood deciyieldedsomeinterestingacsionswith. cessbenefits.I got so frusBynowtheCEOsarethor- tratedin dealingwitha trader oughlv bored.From being ofa largeoil company. Hehad peopletheCEOsbe- anagendathatdid not do me, business Theyjoin the or his company,much good. comesocialites. socialcircuitof theballet,the To breakthe impasseI faxed symphonvand charitablein- our proposalup the trader's stitutions.Golf becomesa corporateladder \4/henthefax, dominantpart of theirsched- with the advantages of our ules.(Golfbuddies,not companypersons, havemuchbetter access to the CEO.)Their eyesstartto wanderandfind that their spouseslack the looksandtheskillsto playthe roleof socialite. Next is an affairwith "ayoungthing",and theCEOsarein themiddleof

proposal-agoodonefor both we believed got companies, I to theright decsision-maker, gota promptcallandthedeal wasdone. Right sizing,e-mail,and faxmachines aremanagement toolsand arc instantlyavailable from consultantsand computerstores.The more i m p o r t a n tl e s s o ni s m u c h cheaper,and more critical, than.software or consultants: yourself once moretobeacforce Harvard professor cessible. MartyMarshall usedto exhort his OPM (OwnersPresidents Management) classr"lf I had my way I would not giveany of you an officein vour HQ. you cando in Thereis noflring your office.Go out and see your customers,suppliers, They partners, andfinanciers. Findout makeyour business. whatis happeningandacton it." lt is sotrue.CEOshavethe

yourtime; Don'tretirebefore if youmust,thenquityour CE} positioncompletel!.

power to commit theircompanies.Combine that power with day-to-da),accessto their stakeholders.Result?You can becomethe darling of vour customers.You can get great ideasfrom your suppliersand partners, to save monev and improve operations.You will get more opportunities from vour financiers. In my 14 vearsin the oil business,I have not gotten a single phone call from any CEO.By contrastI may be one of thc very few oil company CEOs that anyone in the industry can accesswith one phone call. I myself make thirtv to forty calls a day to various peoplein and outside the industry.This hascome in handy in spotting small changesin mv competitors' moves,and adjusting to those changes.It is not easv this accessibilitything: vou sometimes wander up the wrong paths, and you seemto waste a lot of tine sitting through endlesslunches.In time you will learn to managetheseinteractions.Keep in mind that any one of these interactions might result in great ideas, and breater opportunities. And unless you interact,you will not generatenew ideas. Ideas are never born out of vacuums, much less inaccessible CEOs. Community work is a boon to societv;it's just that many CEOs, becauseof the no-accesstrap, ioin them too soon,perhapsat a greaterloss to the society.Don't retire before your time; if you must, then quit vour CEO position completelvOnly then canyou do your communitv work well, and with the greatest gusto and passion. isn gmdunt. of Mr Rof.rly Cird,rdrnt batth19i.1H. iscurrctlu l',48M dnss thc Prcsiddtt af Chttt.oil C]rl'nrali(rt,

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