The Asian Manager, February 1994 Issue by Sherbet Manalili

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Publ|!h.t FelipeB. Alfonso

4 GetRldof AntQuallty Policles

EdhorlFohlrt MichaelA. Hamlin

T. Domingo 8yProf.Rene SimeDabyProfessor in Managemert AsianInstituteof Management

Man dl.€ Edltor Kin Gatbonton Edltor€t{argo lbana C. Gutierrez

Poorqualitycomesfrom bad management,not bad employees ReneDomingoelaborateson the major obstaclesto achievingcustomer satisfaction,

Art Dhlctor AlexanderBowie Producthn Aldrtrnt AmyG. Espiritu

rl Q&AonTotalQuallty

Co.*dbutor! JosieC. Aliwalas BelindaSingson

Bythe Editors

A..oclato PuHbhgr & Adw'tLlng Dlrlctor DeliaC. Gutierez

Asia's leadingTQMpractitioners discussbusinesscontinuingemphasis on qualityand constantimprovement.

Alroclrtc PuHl.t r & Clrc{lrtldr Ortctor Ma. Montsenatlturaalde

25HRMandYonrCompany

Dlttctor ior ODoradon3 PinkyL Gallegos

gy JacintoC. Gavino, DPA Dean,Masterin ManagementProgfam AsianInstituteof Management

Acco0t Maiaggrr r\ate. M. Diaz ElenaR. Duran

s MaklrEStrate$fHappon ByRobenDavies of Strategic Management Professor Eusiness School London

Alv.rd.lrE Coordl.Etor EdenA. Baysic

41 TheModomTradltlonal Entends6

Clrcolatlon A!.|.t!nt GygieNuiez

Covd

ByProf.Leonardo R.Silos PLDT Professor in Eusiness lvana€ement AsianInstitute of Management

lusadion: @Javi6r Fom.ro D€3lgn lnc.

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Mlc-haclA. Hamlln

decisions Decisions,

and Credibiliw QualttyManagement anila - We are reminded by Robert Heller of a process first described by RobertWaterman:Group Think. Watermanis onehalfof the (half) famous duo which gave us h Searchof Excellmcea decadeago. Waterman discussesCroup Think in a subsequentand less renowned b<rck called The Re fieroalFactor. "No individual" involved in collectivedecision-making - itself an illusory concept, these "extwo gentlemen suggest presseshis own opinion; instead he mouths his understanding or version of what he believes the group view to be." Indeed, in The Decision Makers, Heller argues,"ln Japanesecorporation after corporation, president after president hasshown a capacity for adventurous, realistic decision(making)thathasgonefar beyond the prowess of all but the very best Westem managements." This demonstrateshow dangerousstereotypescanreally be. Manyof ushavebeenconvinced that theJapanese takean inordinate period to make a decision due to the extreme degree of consultation that tradihonally preceedsa maior decision.There arc also those of us who have gone so far as to suggest that decision-makingin Japanis not really decision-making at all. Rather, it is an elaborate plannint processwhich can be cut short at any point it becomes clearthe plan is not feasible. And Heller does note that, "Other people's arguments arc enormouslyvaluable,provided (a) that they are bas€d on fact and (b) that they are expressed vigorously,clearly and frankly; (c)thatsomeMy hasthepower, afterlisteningto all thefact-based -

opinions,to take the final deci- ing quality managementwon't from westem managem€ntpracsion;and (d) thateverybodyelse make it cometrue. lt is hard work tice Olat multinational ortanizaacceptsthat power and the deci- involving fundamental changes tions can fail miserablyby doing in work routines, relationships everything right - accondingto sion to which it givesbirth." For instance,a decisionmight and corporate culture. Success- North fun€rican standards. Colectivelyourfeatur€smight be to cut short the planning pr(rc- f ully accomplishingsuchradical ess or to keep it going. Akio change is reliant on company- sugtest that while the Pacfic Morita kept it going for both the wide includingextra-com- Cenhry may be the era of the Walkman and Sony's original pany suppliers and customers horizontalorganization,asHeller Befavidee cassetterecorder.His - trainint. Extensivetraining. asserts,ultimately someonestill power continued to beaccepted. Asian Institute of Manage- hasto be in chareeand still hasto F. Ross Johnson created a ment professorReneT.Domingo make decisions.In fact, when his US$16billion food and tobacco providesourplincipal coverar- four conditions for consensusbehemoth by "embark(ing) on ticle, addrcssing the reasonsfor baseddecisionmaLrngarenotmet, "effectivedecision-makingis vititwo grand mergers." And then a growing number of reported lo6t US$500million and much failures by corporations seeking ad. kEtead,managemmb ofteri prestigedeveloping a smokeless to absorb quality management choo6e,unwittingly, to be har,ged cigarette; soon after, he lost his into their culturc and routine. totether, mth€( than to risk being job when his managementled AIM associateDean JacintoC. hangedseparately- all of any of buyoutwasoutbid by theformi- Cavino and professor Leonardo them." dable KKK buy-out specialists A. Silossuggestways for regional - to the delight of most of his business and mana8ement Amouncomnt3 Wth this issue,managinSediboard. schools to enhance their relPerhapsmore than decision- evance to and impact on the tor Ibarra C. Gutierrez assumes making,credibility - or lackof prachcrngmanagementcommu- t€ pct of editor-at-large.One of it - determined Morita and nity in providint much of the *re region'smost respectedsenior im- businessmanagers,The Asion Ross'fatesfollowing two major kaining criticalto successful blunders.Credibility "walk- plementationof quality manage- Mtrueer ttas been forhrnate to the-talk"-asDel MontePhilip- mmt, aswellasothermaiorman- have the benefit of his gacticed pines president Ceorge A. Error agement programs. StrateSic eyeand proiessionalexpertise.As puts it, has much to do with alliancesand lessbureaucracyare editor-atlarge,Bombingwill conimplementing quality manage- major emponents of their own tinue to prcvide overall editorid ment practices,our cover focus successstrateSy. direction, and we - and out for this issue. To provide realRobert Davies concludes his readers- will continue to bmtimeupdateson how quality man- important analysisof strategic efit from his regular, in-depth agementwas implemend in six planning in dynamic organiza- reviews of emerging Asian enof the region's top tionsbegunin our terprises and management previous issue.We trends. corDoratlons, we "Pefiaps more round out our feaKin Catbontonwill move up askedkeyexecutive what they did right tures for this first to the position of managing edithan declslon issue of 194 by ' tor Kin has beenoDerationallv and what they did wrong thathelpedor making;crcdiulity moving over for a responsible for coordinating hindeied the intrG look at marketing editorial functions wi& the de-orlackofhduction of qualitv innovations in di- mands of publishing a rapidlyrect mail with klis practices. trowint management publicaMorita detemlned Top manageWadia. Author of tion. Her appointmentcomesat a ment's role in andRoes'iates the Asiafl Direct time when the demandsfor prcMorketing Hand- fessionalism have never been successful implementation is ap- fullowingtwo Dook,Wadia pro- geater in both manaSementeduparent in every firm vides critical cation and publishing for manmajol blunde6." represented: keyexinsights into DM agementpractitioners.We take practices in Asia a great deal of comfort having ecutives are the I *rat are so distin€t Ki"nin charee. champions.Wish-

THEASIANMAMGER . FEBRUARY 1994

C O V E RS T O R Y

Get Rid of T \

AIM'squalltyguru talks aboutthe maior stumbllngblocksto achievlngTQMandtotal customersatlsfaction.

T O

roflcres

BY PRoF.RE E T. Do IItIGo

"ln many countries, the biggest andmost profitable companies ale known for poor,slow andcostly customel se1vice."

maibr causeof failure in implementI ing TotalQuality Management(TQM) is top management'srefusalto drop and dismantle anti-quality_corporate policies,proceduresand practices.Udually hme-honored and taken for granted, they serve to hinder employeesand managersin demonstratint quality in theirj6bsand inservingcust6mers.These policiesandtheworkenvironmenttheycreatesodictateemployeebehavior that in spiteofhis goodintention"todo thingsrightthe first timeT,andmanagement,s exhotation to that effect,he commits mistakes,defects,errors and c-ustomer disservice.Theemployeeis punished,deinoralizedand worse,sentby managementtoa "values" or "corporateculture" seminarto chang€hisbehavior Since the policies- the root causes- stay,the problem is not solved and recurs. - , Why do many companiesprofesling TQtu fail to rcview and change policies? Mainly becauseof ignorance.Ignorance that such policies affec[ employee behavior lgnorancethat such policiesexist at all. An'otherreasonis thit tirey think they can mix conventionalmanagementwith TQM. Managemmt may define TQM as a ritual of slogans,speeches,QC circlesand employeekaining - and not about policy changes.Anothir possiblereasonis that changrnt polcies rs rcgarded as painful and a lossof political power this artidewin diTusscommonpoliciesof traditionallymanagdCcompanie thatare pobtial obstadesto TQM implem€ntation.It is not meantio be an o(haGtive list but it wil serveto €nlight€nand guide thce who wish to review and evaluae policiesasa maiorstepin TQM implernentatiorl

Corporate Performance The most subtle computry policy that could affect quality is tlut of gauging corporabeperforrnance.Typical meisures are financial'in .titure, "bottoLt-litteT prcfits, "top [ine" salesand market sharcand "middle line" budgetsand costs.Note that noneof thesesacredindicesdirectly ind icatequali ty perforriance and custiomer . FEBRUAFY THEASlAllMANAGER 1994

"TQM service.ln fact, they are very effective in hiding quhlity problems and deceiving managementinto believing that everything is well. A profitable company exceedingsalestargetsand meetinSbudgetscan actually be providing poor customerservice- high warranty claims,long queues,delayed deliveries.Profit is a compositeof salesand costs.Quality prcblems canbe hiddm in either item - lost customersand bad s€rvicein sales,and defectsand wastesin costs- and be offset bv imDrovementin the other item. Declinine salesdue io lo;t customersfrustrad with bad servicecould be offuet by cost cutting. A high rework and scrap rate - which drive costsup - could be offsetby an increasein sales,thtrsshowing a healthy profit pictuIe. High salescould alsobe achievedby replacinglost and disappointedcustomerswith new and bigger custome$; salesmenmay employ this trick to i€achtheir quota.Budgetsdo not take servicequality into the picture. Wo6e, budgets,being historical in nahre, incorporate and hide ever increasingallowancesfor wasteand defects. By meeting or exceedingprofit, salesard cost targets,a conventional company does not suspectdoes not thoroughly investigate customer s€rviceproblems and wastein operations.Managementis mole concemedwith how to distribute profits as bonuses.lts attitude is "we are making money and selling a lot, therefore all customersarcsatisfied;they haveno right tocomplain." Themanagementparadigm is CAWS or Can't Arsue With Success. It is not surprising and very ironic indeed,that in many countries,thebiggestand most prcfitable companiesare known for poor, slow and costly customerservice: banks, utility companies,airlines, hospitalt supermarkets,insurancecompanies, drugstorcs,peholeum companies,to name a few Vy'henwas the last time you ever prais€dtheseinstitutions for their fastand friendly service?Customerskeepcoming back - gmdghgly - not becauseof quality service,but becausetherc is no other placeto go to. They havebeenusedand desensitizedto the dismal and chronic level of serviceand arewilline to live with it-until and unlessacompetitorcomesup with THEASIANMANAGER. FEBRUAFY1994

companies ale selvants ot theit

customers andall theil

policies leflect this philosophy."

C O V E R S T OR Y

"Under TQM, suppllelsare long-term partneF,not

betler ard fasFr sewic€, TQM is not against plofits and market domiiration, lt adriwetreseq, iEusng on Proc€ssh€eb ratertunsimplisticfrwrcid irdicabrs.- nEy hack prodrt quality, cuskmer s€nice, quality csb (dE cst ofnot doing it right d€ first time), productivity, safety, inventory levels, other.n Ptocesstimes, etc. TQM companregaugefun per.. formance by monitiorhs drcse irt dtors continu: onsly witr rcal-tirlE data 6prn both o$tsnqs ard slrqfloo$, ard cqtinuouslv raise arrCimplwe tpir levels.

to be pltted agalnsteach

Cu3tomolSorYlce - TQM companie live by the following commandments ot customers€rvice: 1. The customer is king (or god, as in Japan). 2. The ostomer is always right. 3. Never atgue with a customer (You may win the aryunent but 106€the Antiquality servic€ polici€s essentially violate these If thele arc theories X and Y to describehow flunagement tleatsemployees,we canalsothink of similar theories to describe how it heab custromers.Theory X assumesall employeesarc lazy,incompetientandinconidble; theory Y aisuines 0rcy aireall haid-working capali'le and ftrll of Dotential. Similarly, theory X in customerserviceassum€sthat all customers arc bad unless ptoven othetwise. ComDanies with this busines philosophy have sophisticated;d ob-. noxious conEol systems and policies that monitor and check clstjomers wherr they enter, roam around and exit companypr€misesand storcs.They alsohavebureaucratc prccedur€sto checkcustomerbackgroundand credentials ' beforethey canavail of the company's goodsand services. Forirstance,atheorvXbank'assrim*thatallborrowec arc potential bad debhon,and depositorsas taunderersof illegally-gotten wealth. Theory X supermarkes and deparhnenl stores tr€at all clstome$ as nuisance whdow shoppersor worse,potential shoplifters.To heatcustiomers with indiffercnce or sloppinessis bad enough, but to suspectthem of evil intent is worseand conhary to all business s€nse. FronFline employeeswho maltr€atcustomersmay iust becomplyrng with thecompany'stheory X sewicepolicies. A company which mistreab its employees usually misbeab its own custiomers,employrng theory X poticies in both cases.To aggravate*re situitid, the ehpliryees take revengeon orstomers. TheotherextremeistheoryYwhichassumesallcustomersaregood.TheoryY companiesarc known for absenceof or minimal customerconEolsystemsand polici€5.Customersare treatedaskings.They cango in and out of company premis€s without conbols and appoinhnenb. They can avail of and pay for prcducls and serviceswithout hassles and with a minimum of paperwork and other requircmealts.They can r€hrm purchasedmerchandiseany time for any reasonand tlrecohpany staffwill cheerhrllyriplact it or r€tum his morrey- without questionor investigation. 6

For sometheory Y companies,custome$ need not Dav anything if they ari not completely sadsfiedwith the servrce. Theory Y companiesdefinitely delight customerswho eventually becomeEpeat and loyal ones.TheoryYcompanies are genuine TQM companies,and they are rare. In reality, companies serve clstomeE within the range of th€orie6X & Y with the maiority clusteringnearcrto theory Why do companiesknowintly control ratherthan serve customers?The $'pe I and type tr errors of statisticswill s€rve as a usefu.lanalogy.Ty'peI is eiecting a hy'pothesis when it shodd be accepted.while type ll"is aciepting it whm it shou.ldbe rciecird. Similali'; tne tvpe I ;rror-in customer seryice is rqecting a good custoirier when he should have beenaccepd - servedor sold to. The ty?e tr error is acceptinga bad customer servicewtrm he should have beenrciec'ted--disqualified for a loan, etc. Antiauality servic€polcies try to avoid t'?e n eflors; fgU Ues toarioia type i er.ors.lpUcompunii"do not try tobalanc€theco6tsofthetwo type oferrors.Theanti{uality company is more concernedabout avoiding the cost ani da{uge due to one bad custiomerto the extdnt of compru mising the convmierce of good, paying customerswhich form the vast maioriw of clients in anv business. It is indeed v&y rire for a company to go bankrupt or lose huge sums ticause of bad i.-,-puyr.g cusromes. B€side6,somecustornersdo not pay on time becausethey receivedbad products and bad'se;vice in the first placr-i. Much more common arc companiesgoing under because they have beenmilked by their managementor ownerE.

IHEASIANMAMGER. FEBRUARY 1S4

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C O V E RS T O R Y

Successin any bruincs comesfrom delighting fie vast majodty of customeG, evm to theexklt of acr€pF ingsomebadc'neandcommittint tlpe n €nors. The vrofi, yruict was derived ftom &relatin word senza whichmearsssnnrlorslrrcy. TQM compeniesare servanb of theircustornels,and all their policie reflectthis phllosophy

"Badquality comes frombad management, not bad employees."

Employee Evaluation Another area which anti-quality policies abound is employee performance evaluation and conhol systems.Thesesystems areusedto compensate,promote,motivate,monitor, check and discipline employees. The h.,,omost common performance targets used for evajuationaresalesand productionoutput.duotas areset to determine comperuation. Salescommissionsare paid based on achieving or exceeding salesquotas. Worl.ers' rncenhvepay and even take.homepay---asin thepiece-rate system-may be determinedby productionoutput. The darger w ith thesetargetsis that they are purc n um-bersand completely hide the level of product qualig and/or customer service.They aJet,?ically setasobiectivesunder the result-oriented MBO system.The MBO managerdoesnot careabouthow the rcsult is achievedby his subordinatiesas long as it is achieved.He could not carelessabout process improvement dnd development, customer feelin-gsand suggeshons. If customersor salesarelost becauseof product defects, bad serviceor late delivery, tlle salesmancan get new and blggercustome$ to cover up the shorffall. He may actually hcreas€ salesand e\ceed his quota. The sa-e ci:Ua ubi> happen if the remaining customersorder much more than before.The evaluator or salesmanager and the salesman .' will not bother with the prcduct iid service problems becausethe quota hasbeensadsfied.Product deiectsmay not be fed back to the production people for imrnediate correction.Ofcourse, the lost cnstiomerwill bad mouth the company to ten other orstomers - currmt or potenhal. Similarly,production quotasrnaybeachievedevenwith higher intemal rciectratesby theQuality Assurancedepartmmt or high ertemal reiectratesthanksto by customers. The prcduction worker is iust interestedin incr€asingoutput to incleasehis pay. The systemallows and mcourages him to behave this way even if quality, cost, yield ;d customersare sacrificed.Evenwhen defectsarc produced, the tine is not stopped sinceoutput will declineand so will his pay. Defectsale not investigated,and to make matters worse,theyarere routed to rework operators,whoseincenhve pay is tied to the amourt of defective they have reDaired. The budget system is also notorious for hiding quality and service problems. ln theory and in practice, the coit budget canbeachievedevenwhen providing bad serviceto customersleadint to lostsalesor high wastage defecb,and rework in the shop-floor. Again, budgeting is a numbers game and encowagesmanagersand employeesto forget about qualiry lt does not reflect and tecog"i-re pro.;ss improvements contributed by employees. Zero budget 8

variancecanbe achievedeven with zero customerservice. Finally,apervasiveantinuality policy is designatingthe superior or direct bossasthe evaluator of the performalce of hjs subordinates.At first gldnce,*ris poljcy sounds reasonablesince the bossis supposed to be waiching his staffand know everythingtheydo or don't do. The failacy hereis that with theexceptionofa secretarywhich serves her boss,employeesusually do not directly servetheir boss but otheremployees,managers, departmentsand customersof thecompany.Thesuperiorhasno ideaof theservice qualitv and efficiencyof his staff, and is therefor€the least qualified to passjudgment. Only the intemal customersor other employeesand deparhnentsservedby his staffcan truly evaluatethe performanceof the staff. It is common to be higNy evaluated by one's boss,and to get promoted accordingly,while being rebukedby one'sintemal customers for bad service. The only correctperformanceevaluation must be made by one's customers- intemal or extemal. The marketing departmentshouldevaluatethe performanceof the production department which in tuIn should evaluatq the performanceof themaintenance,mtineering and purchasing departments.Of course,the besi evaluator of performanceand quality is noneother than theertemalor paying ostomet theultimate recipientandjudge of thecompany's products and services.American Expressmakesit a policy lo tie the manager's bonus to the'number of cusiomer complaints his dipartment receives. TQlr4compani-esstill usequotas and budgets,but very carefullyand intelligently.Thev are temperedand validatedbjr quallty data"andiustorirer feedbaik b{ore they are THEASIAI\MANAGER. FEBRUARY 1994

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and hiShly paid purchasing managersof major corporations have been reduced to theclericaltaskofcomparing bids and selectint the suPPlierwith the lowest bid price. ThesuPplierwill natually play by thebuyer'srules,bid as low as possibleand sacrificethe other vital elementsof quality, de_livery,commitment s€rvice,and reliability. He can tactfully hide these trade-of6 in his bid, since the evaluator or putchasing maruger is often too reshicted or incomPetent to check these comPlicad, often technical and lonS-termissues.The lowestbidder tumsout tobe the highest bidder in the long run becauseof the pnrduction delays and lost customersits poor quality and rcliability cause. Whatisironicrsthatacompanymayclaimto be practicing TQM and urge its supplier to im|-

melted and mixed with virgin supplies. But such policies also exist in manufactured and assembledpro<lucts like semiconductorsand home appliances.Downgrades may comein two forms: 1) Downgradesare sold with the same brand nameasfirst-classproducts but at a discount;and, 2) Downgrades are rcld with a different brand name, but cheaperthan first-class. Customers may shift to the downgrades sincethey are cheaper,and an artificial demand iscieated. Thus a defect becomesa new productline withits own production and salesplan-even rts own budgetl Of courie, product and company image eventually deteriorates as the market becomei confused with the company's products-firstclassand downgrades, bearing the sarire169oand brand name, sold at different prices for no apparent reason. Productionplanningoffirst-classproducts becomeschaotic sincesecondsun-

"Bad quaritvffi$[':ly"SilN,ii:SJ:.;;i]*' quatity Sfril:t?#ff.i:'L1ffi1ff,J,ffi Sffiftt?frf.i:ffi'ffiiffi'JlHt changhg the policy of awarding and selecting |,,Bad | suppliersbased suppliers basedon bid bid price. price.Since Sinceprice price is the the Themainreasontor downgradesand focalpoint, rocal suppler will w l not he€d heedany exhorexhor' Pomt,the supplier tation to imprcve lualiry_TQM comp;es not

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rework 15firuncial in natuJe.The company thinks that rather tlur rrap and

H*il*ffi*:'ffi'J*\i'il;ffi*l"ifi |- management, il:Hifi:;1i,i"S:3ffilhTgl anddivelopthemsothattheycanbecomeworlda discorurt.Managementalso tlijr*s itis nOt bad "T

" ii#;:, "fi:i'iT ;,f#,il #H€ ?fitr#i*?,fli"i,"J' ieJr,aui,,g oe emptoyees. departrnent rcport to the finance

puchasrng departmen! thisset-up sendsa the strongsignal b the ol8anization that pwchasing is about cost{utting and finding the cheapest source. T)?ically, the finance department - beinS control and audit oriented - is the leastconcemedor knowledgeableabout product and service quality. TQM companies would rather have the purchasingdapartmentFiortdirectlytothecEoortoiemain intemal customer- the manufacturing depafiment. The filst set-uPwould make purchasing more concemedwith total cor?orate needs and profitability, while the second would make it more sensitive to the requircments of its main intemal client.

SalesandP?oductlon Management Themostblatant and repu.lsiveanti-quality policiescan be f<lwrd in salesand production management.Thes€are, in incrcasingorder of gravity: 1. Maintaining rework operations. ,. Downgradint defects,minor or rnaior,into s€condclassproducts. 3. Selling secondsor downtrades to employees. THEASIANMAIIAGER. FEBRUARY 1994

they themselvesproduced. Thesepolicies bacKire and the company incurs morecostssincedefectsarcnotinvestigatedandprevented. Worse,defectsare encouiagedand rewarded - with employee discounts. The biggest toll is the detenoration of company image and employeebehavior

Bad Mana€lement = Bad Quallty The latequality guru, Dr. W Edwards Deming, said that 80% of quality problems is causedby management,and 20%by employees.Bad quality comeshom bad management not bad employees.Bad management means bad leadershipand bad policies. No employeeis by naturebad;his work is his livelihood, and he knows he must do his job right and follow the nrles to keep it. Essentially,it is the environment, the rules, the tools,the training and thesupportmanagementprovidesor does not pruvide that make him commit mistakes. This belief is fundamental to the understanding of TQM. Companieswhich arenotrcady and willing to 6ke fullmanagement responsibility for a// quality problems should not go into lQM. I

I N r I - U E N c I N G/ o U R M n n K E T Cover Story. TheNian Managerpresentsmore than a maior story lt presents a dialoguerepresenting oftenwidelydivergent viewson a specific, major management concern- in everyissue - by respected experts,executives, andacademics. Inour issue on Shapingthe Future."Sime Darbygroup chief executive TunkuTanSriAhmadYahayasaidthe AsianManageris not yet preparedfor global,free-market competition- and suggested that he or she mustlearnto compete. Focus.Followingthe coverstory,originalarticleson a varietyof topicalmanagementissuesare presentedby major authors, academics, andpractitioners Topicsincludemarketing research and strategy,leadership,kaizen, total quality management, management consulting.andthewinners ofAsias mostrespected acknowledgement of excellencein managementThe Asian Management Awards. Departments.Shakersand movers in Asian businessand govern ment,newtechnologies andapplications, thelatestguru s accountsof hisor herobservations of excellentmanagement in achieving organizations, andwhatto do withthatrarecommodity and scarceresource:leisure.Thesearethe concern s of TneAsia I Monaqer's regulardepartments, compiledand written by the eollors. "Money Columns.From Matters"to A Better Way"; from "Entrepreneurs C o r n e rt"o " T h i n kA b o u tl t , A I M c o n s u l t a n t s , a l u m n ia , n d f r i e n d sp r o v i d ei n s i g h t st o A s i a ne q u i t ym a r k e t s , qualitymanagement, therisksofentrepreneurship. management s t y l e s ,t h e , e n v i r o n m e natn d s u s t a i n a b l d eevelopment, i n f o r m a t i otne c h n o l o g tyh, eA s i a nM a n a g ear ;n d ,l i f e .

Associate Publlsher E Advertlslng Dlrector DeliaC.Gutierrez REPRESENTATIVE OFFICES INTERNATIONAL H o n r K o n s P a m e l aC h o v P a c r f uAcs r dM e d i a ,l 3 4 . 3 6 1 - 3 6 1 r . o n gK o n gT e l 8 3 46 1 2 EF. a x1 8 5 - 2 1 LocktraR r t 6 a dW a n c h a H 8345960 N4edia IndlaSub-Continent: SouthAsia(P)Ltd.,ApartmentlA, , an t i p a t h - l a mI ,aK a t h m a n d uN.e p a lT e l . .2 2 1 A b h i - A n iAl w a s K 5 7 6T . e l e x2 6 0 6T V E D R Er \PP F d xr q 7 7|-r 2 2 73 3 6 a .a k a y a mM a e d i aI n t e r n a t i o n aI nl c . l a p a n :H r d e oN a k a y a m N Minato-ku,Tokyo FonteAoyama7O52'22 l4 Minami-Aoyama, 1 0 7l d p a nT. e l .l 0 j l 3 4 7 9 - o l 3ila. x { 0 3 )3 4 7 9 - 6 1 3 0 Corporation. CPOBox Korea Y K Chun,FrrslMediaServices K 29137, FMSCORP 7919Seoul,KoreaTel 73E3591/3592.Telex F a x1 0 2 7 ) 3 87 9 7 0 nh . i eE f x e c u t i vleN, S C o m m u n i c a t i o n s P a k l s t a nS, I S a l a h u d d iC L t d 6 / FP e t, i m a , a n o r a m a C e n tFr a l i n n a hR d, K a r a c hPi ,a k i s t a n . Tel 522868.522067 Fax19221|56E2271 Pte.Ltd..83AEast SincaDoreTeddvTan.PAMMedraServices RoadTayBuanCuanShoppingCentreSingapore1542 Coa-st Tel ]48 4495.Fax165)4406760 , hal T h a i l a n d D r A n t h o n yS h d r m a M a n a g l n gD i r e c t o r T R e o r e s e n t d t rLv ted . 8 0 7 / 5 EP o r n t a v e eS. u k h u m v tSt o i I 0 l , 9690-2Fax ThailandTel \662133l| Prakanong, Bangkok10260, 1662) 3719303 U n i t e d K l n e d o m .B n a nT a o l i nA s s o c i a t e s , 3F2i s h e r yR o a d l e m o s t e a iHi e r t sH P I I N D U K T e l t 0 4 4 2 1 B o x m o o rH E m eH 246O34 215635.Fax104421|

T f t e A s l aM n d n a g â&#x201A;Ź r i s t h e o n l y p r o f e s s i o n a l l y p u b l i s h e d , , a l u e L- ai kdedtehdei. n s t i t u t e i t s m a . x i m is relevance o f f i c i am l a g a z i noef a n ym a n a g e m e innt s t i t u t ei n A s i ao t h e p r a c t i t i o n e r ii t s c o n c e r n , c o n t e m p o r a r y A s i as l e a d i n gm a n a g e m e n t et c h n o l o gm yagazine T .t q n a n a g e m e nt rte n d s a n d t h e i r a n a l y s i s ,r e a l - l i f e ' A s i a nM a n a g ecr o n s i s t e n t l yp r e s e n t sa h i g h - q u a l i t i n a n a g e m eins ts u e s ,a n d t h e o p i n i o n so f A s i as k e y e d i t o r i a lp r o d u c tt h a t i s l i v e l y ,i n f o r m a t i v ea, n d h i g l " i l e c i s i o n - m a k e r s .

tuSocie Ttnorrcw

C O V E RS T OR Y

Total Quality Asla's leadlngtotal quallty pEctitioneF dbcuss how TQM has affested theil companies' everyday

operatlons "At Motorcla

BY lHE EDITORS

,rairy e"*ap" no othersingleword { appearsmorc frequendy in a businessman'svocabulary since the Japanesestarted r6ing it to acluevecomp€titive advdntage.ln tie past, quality generallymeant's€tting standardsand winnowing out qecs from the production line. Ii:day, quality encompassessomething much more complex. No longer does it mean "defect detection," it irnplies rigrd processcontrol and a systemby which defucts are not so much det€ctedasprevented. Irr this month's issueof TheAsianMaruger,wefeaturekey officers from some of Asia's most d)narnic o€anizations, companiesfor whom quality is centerpieceof their overall stratjegyfor meeting competitive challmges and for whom quality is critical to tlleir long-term success. Among thosewho have taken the qua.tityinitidtive: Jess SanMateo,total quality manager,Johruon& JohJrson,ihnippines; C,eorgeA. Error, president and generalmanager, Del Monte Philippines, Inc.; Danny.lavelosa,assistantgeneral managecMotorola Phils., Inc; R.L. Hawthome, piesident, Dole Thailand; Menelao T. Mercado, combrate pldnning mdnatet Mabushita Electric Philippines; and, H.K. Ieung, director, Reliability & Quality Assurance, 12

Motorola Semiconductor Products Sector, Asia-Pacific Group. Stathg dE d?€lr€tot qltfrtl hp'!{/enq', b ea6iy,,f,,l€,v*g tt b.trtuttltl Ertdrytffi rrl|| yu$ cutrfl/y Mrdrcn *t,ts werw g,€|,tlotE' J€ss San Mats Johnson& Johnsonhas a long heritageof quality basedon the purity, efficacy and safetyof its pruducts.Manatement tluough the yearshasalsobeenguided by OURCREDO,whicharticu.latiesthe compary's responsibilities to its various publics and embodiesout corporate values.Thes€two factors- concem with prcduct quatity and our corporate values - have helped w focus - and keep us focused - on quality improvement. As early as 1981,our company conductredwhat we call "quality imprcvement interventions." These are regr.rlar meetings with our workers that focus on supplier quality management initia.lly asa meansof rcducing the then high ratesof packatnt material rcjects- a problem which beset J & J at that particu.lartime. In 1982 a more compreheruiveapproachto quality was . FEBRUARY'1994 THEASIANMANAGER

Semlconductoq the incenthe to cuftlvatea qualftyculture is supported byvadous. iocognition schem€and toob targeted br lndividuals a6wellas teams."

developed. The Quality Improvement Process (QIP) - as it was known then - involved educating,through workshops and seminars,all J & Jemployeesin theconceptofquality accordingto Philip Cro6by'sFo!/ / bsolutes of Quolity.Wealso establishedquality teams operating along the lines of the fourteen-stE QIP approach.Suppliers were given the same courseson quality because their awarcness and cooperation were necessaryto effectquality impro;ement. By 1989,we were alreadybeing rcco6nizedas a leader in quality managemmt, and we won numercus awards.Theseawards rcinforced our employees'enthusiasmand acceleratedowqualitv' imDrovementinitiatives. 190 marked our transition ftom QIP toTQM. Management !€cognized the importance of focusing the entire olgani"ation on delivering superior custiomersatisfaction and initiated stepsto align the entir€ company to thjs new mission. This included the reorganization of J & J's sale organizationaswell asupgradhg our information technology; the upgrading of personnel through more stringent . FEBRUARY.1994 rHE ASIANfuIANAGER

recruitment policies aswell asmore through educationandhaining theadoptionofworldclassmanufachrring techniques;the rationalization and re-€ngineering of business upcesses and rwitalization of our product developmelt effort. Sinie then, J & J has continued evolving, reflecting the changing rcquircments of the marketplace.All theseefforts have rcquired trainin& training and more training aspart of the overall quality improvement pr(rcess. Trainine is also the bestmeansfor our workforce to acquire new skills; and for management, it provides the most efficient vehiclefor attitude formation and valuesclarification. GeorgeA. Elllr This is how Del Monte introduced TQM into its everyday operations. It was rcally a stepby-step Focess that involved inqemental changeseachmonth. Beginnin8 in 191, Del Monte's senior staff were requfted to aftend seminarsconductedby Tennessee Associates Intemational (TAI) on Continuow Improvement. In April, 199, the TQM SeniorSteeringTeam,composedof 't3

C O V E RS T O R Y

"AtJ&J, myself and Del Monte's geneml hourly workforce on the PlanrEnaser as well as those ditationand in theCannerycomqualltygoab rectly-under our sup€reisio& pleted a one-day TQM-CI was oryanizd. Soonafter, Del corrls€. a]eembeddd Monte's corporateprint media, Del Monte's structure fol- Tidbits,Danag, Managenent wlttln the lowinS implementation of DiSestand Pir,;tit - featur€d TQM is the same as the edstoompany's TQM-Continuous Improveing organizational structure. st?atelc plans mentinformatiory activitiesand The vice presidenb /dir€ctors processes. The following and their iorresponding direct andale an month, 130senior staff,managrcports makeup the area/diintegralpartof ers and distributor owners atvision steeringtbams.Thesentended a fourdav courge on ror managers, managers ano €achdlvblon's TQM-Cohtinuous Improvesupervisors with their dircct operational ment given by Del Monte, rcports ar€ each o€anized as U.S.A.consultants. natural management teams plans." In September,a TQM senior (NMT). The supervisors and manager-coordinator was aptheir direct rcports make up pointed, r€porting to the president and gen- nahual work teams(NWT). eral rnanager,and he was made a memberof As the natural manabementteams finish the senior steering team. ln November, 45 analyzing specificprojects,prccessimprcve. selectedtreamleade$ attendeda three-week, ment teams(PIT)areclErtercd to improve the non<onsecutive seminar on managing for prgcess.And these teams meet regularly to continuous improvement (MFCI) conducted diruss and manage their issues,conc€ms by TAI to prepale them to act as TQM and processes.Eventually, every employee facilitatjorsin their organizationalaras. becomesa member of a team. ln February 193, 22 graduates of MCI Danny,ayolo8a The introduction of TQM in underwent a three-day, train-tie-trainer Motorola stard with a factory-wide aware. coursetiosupport in-houseeducationin TQM ness campaitn headed by the company's - Continuous Improvement (TQM{D. leaders.The awarenesscampaignelaborated later that year,a TQM poster design contest on theneedfor total customersatisfactionand for those who attended the TQM{I classes how each Motorolan could contribute to waslaunched.And inAugust1993,500senior achieving this toal. The greatest difficulty manaSers,manageE ano supervrsoF com- was swtainins-ofthis awarenesslevel until it pleted the fourday TQM{I couse. ln Octo- became part the company culturc. To ber 193, 1300 lead-personsand montNy achieve this, the followint systemswere innon6upervisory personnelcompleH a two- hoduced or redefined. day TQM{I course.This brings us up to the Firsl objective measur€ment systems present. Recently, 3,100 members of the were develop€d covering quality, delivery '14

and administrative services.Second,comrnunication systemswerc deigned to provide all levels in the organization rclevant and r€al time information. Third. educationand training programs werie focusd on providing quality improvement skills at all levels. Fourth, individual and team efforts were organized,withemphasisonintemalcustonersupplier relationships - between rnanu-facturingsFp6andorganizatimalfunctions. And mo6t importandy, the leadership team had to live "live oualitv" R.L, HarrvthomeI'm n6t suie any cornpany ever achieves"Total Quality Management." We approachedthis in a somewhat different mamer. Ir'\bfirst confirmed that each of our 3J00 employe€swas definitely interesd in being a part of an organization that considered qua.lityin everything it did. To get there we had to makesignificant improvementsand using thepremisethatanyonecanalways do better,we initiad a verv active continuousimprovementp(Bram.?riecfs were devised,goalssetandtEining undertaken.This was all to encourageus to always look for ways to continuously improve in all areas. M€nolaoT.luqla(bTheintroductionof TQM is not a specific proc€sswhich can easily be defined; rather, it is alrcady inher€nt in our day-teday activities and as such, is deeply iood inour colporateculture.So,your question mishtbe rcinstad asi." Htu) areue ableto dewlopT corporateculturc ol quality and di*ipline?" The formdation of our corDorateculture arc the "Basic BusinessPriniiple" of Mr. Konosuke Matsushita which state- among other thines - that the final aim of an earterprise is to allow peopleto live more ricNy and happily and thus help make society mor€ peacefulandprosperous.This meansprcducing an abundant supply of high quality and high performanceproducts that meet every customer's needs and wants at rcasonable prices; and, providing excellent after sales service.But more in pufting our heart into the prcducts and servicesthat we provide. This is "Human Electtonics" - elechonics for the benefit of Mankind. Wesharcthis missionwith all ouremoloveesby introducing the BasicBusinessPrh6ples to new employees during a one.week orientation. And we begin every day with a momingmeetingwhercwe rcciteour general principles and creed.Our employees know our principles by hearqthey idmtify with our mission and our goals and make them their owTl. Diripline hasbecomea way of life in our company,and this has rcquired shon& consistentcommiknentby top managemealtBe causewe opente on a divisionalized slstem of management,each deparknent is considercd a separateprcfit c€nter or a "company within a company." We promote healthy competition among these departments THEASIANMANAGER. FEBRUARY 1994

C O V E RS T O R Y

through our quality pmgrams. Customersatisfactionappli€s to every as" pectofour operations.liy'eview evm the least of ow clworkeE asacustomerwhce needs and wanb have to be sahsfied.Soeveryoneis motivated to continuouslv irnprove - /raizan - our prod uctivity, prodircf qiratity ana pru duction efficiencv. H.K. Lau4lWe wholeheartedly believe pee. ple are the Company's biggest assetin making the fundamental cultural changes requir€d to succesofirlly implement TQM. Training both philoeophicaland technicalis requircd for each and wery anrployee, Managementis hained more in conc?ts and skills involved in leading dunge. Working level employees are trained in techniqtres rcquired for implemmting change. To continuously cultivate a qudity culture, the Reliability and Quality Assurarce DepaiEnmt and the Human Resoures De. parhnerlt team up as the prirrcipal driving forces for continuow improvement and re newar. The incentive to build this monentum is suppord by various recognition rhernes and tools taryed for individuals as well as teams;e.9.,celebratingsmall wins performanceappraisaland carcerplarufn& Motorcla Teamof the Year,the Sha*'s Fin Soup Prc8ram, erc. Aparticipativernanagem€ntenvironm€fit is encouragedby cross frmctional work impmvement teams (WfD, task forces,prciect t€amsandserviceimDmvementteams. Man-to agers- from time time - act as role models by penonally drampioning some of the improvemmt activiti€s. ht youl/cny M d, yo,r cllpty't tt'ffalon d 4dty dd ydr # A*. S Mris Wlren we stared the Quality Improvement Ptocess,our definition of quality was conformitv to requirements.Over tirne - and with thLefocus on the exemal custromer- our definition evolved: Quality is understanding, accepting meeting and exceeding customer expectations. In short, custornersatisfaction. Quality goals arc enbedded within tre company'sstrategicplans and ar€an integral part of eachdivision's operational plans. Exampleswould include objectivestroimprcve delivery lead time and order fill ratss, improvemmts to erjstin8 products and inkp duction of new line ext€nsidrs and Droducts to satisfy identified consuner needs; assist businesspartners in achiwing higher levels of product and service quality; shotten machinechangeovertirnesand prcductpmcessingtimestoinceasemanufachringflexibility, shortenthecycletime for dataacquisitionand reportinp rfruce raw and packighg rnate rial and in-processdefects and wasts; and, prcvide sulficient baining for ernployeesand THEASIANMAMGEF . FEBRUARY 1994

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at econonical c6ts. webrovide. Weworkhardto wnal uoy Our mission is to dumpion d understand our cusromels cu.ltue of co-ntinuous i.rnprove and frequently run surveys Wa||t Of ment locrrs€d qr customer satisand other effective feedback n€€q." faction through employee systems,Butmot€irnportant empowerment and teamwork. G out goat ofobtainine firstJav€laa'"IotalcustomerSadsfachand iiformation. Evir our tion" is theftmdamentalobjective topand middlemanagement of everyMototolanandthatishowwedefine arc rcquted b vAturc out and get a feel for quality. dre mirket. ,,hotal cus. The .Corporation's primary toal is to l.€ung olrr definition of quality is achieve"SixSignaandBeyond."SixSigmais tomersatisfaction." a statisticalterm meaning a defective rate of Our quality goalsarcmcompassedrmder 3.4per million. the Six Sigma & Beyond goals; . 10xdefect rcduction every two yea$; It is to this primary objectivethat all meas.Customer drivery uement indices r€late.Otiec{ive and dosed oSetup and achieveaggressivegoals; loop sysFms have b€€n defined to measure . 1Oxtotal cyde time rcduction every five all key aspectsof the operation ftom product quality, timelinessof deliveries and even tlre yeals. quality of adminishative serviceslike paynrll, caletena,c6t accountingek., tnJtt|'r,, ,'a€€ttsw W bt ,€'tlcu,i''ly tlaw$o|t|. The ultlnaie definition of quality q@f qta{tyot h hn,/ff'''f'/d,|gftl,'/: is giving customerswhat ttrey want or need. ttp pdrct? Q,d/ay ol 'f'n'f,€? Clu.fityotdp Ourdefinitionof whothecustornerisnotor y wo'.(Weavllr,',ts?tr.? indudes consumersofour oroducs but other peoplewe serveintemally. Our goal is to give Son tllrtoo Our TQM effortshave focusedon all customersthe quality of goods or services delivering superior customer safisfactionby that ttey require from us, unde$tanding and improving our performMorcaab tryeview quality as not only con- ance and capabilities in six key areas:Fi$t

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For further information please call (021) 649-8472,649-8480, 624-4090,629-7809,600-5444 or fax (021) 639-0112, 624-4091.

C O V E RS T O R Y

"At MatsGhita, leadership fmm a proactive and supportive ing goods, to sell and make a concem and fears.One exmanagement sharing one vision, and com- profit. Through training and ample is the lossof authorrvebelievethat mitted to its achievement;second,cornmitd education we have been sucity or ajob. Other stumbling employeesempower€dbytrainingand work- cessfulin convincing our supblocks hcluded irnpatience, thefinalaimof an hg in coopemtion to contribute to superior port and service troups that confusion, uruealistic exenterpds€ is to customersatisfactionin their own work areas. they are an equal parhEr in pectations about the ThLd, products of superior value and su- our production process.Their amounts and timing of peodeto allow perior customeracceptanc€. Fourth,prccesses efforts allow a better flow of monetary rewards or relivemorcdchly that add value to the customer,managedby information and service and tums. fact and continuously challengedboimprcve provide for the purchase of Otherobstaclesmightinandhafftilyand efficiency and costeffectiveness.Fifth, an en- materialsat higherquality levclude unrealistic expectathushelpmake vironment conducive to irmovatior! continu- els- which allows end prodtions of initial time ous improvement and personalcontribution. ucb to be sold at better orices. There was commitments. sockrtymo|€ Sixth,businessparhuships thataremutually Merca.to Quafity of people. also skepticism - some peaceful and beneficialand long-lasting,basedon a shared "We Make People BeforeWe thought thatTQMwasiust obsessionto deliver suDeriorcustomer satis- Make Products;'is more than another productivity proprospercus." just a slogan. It is the reason faction. gram in disguise. As you can see,this list covers virtually why we canget ordinary peoThe aspectsofcompany every aspectof the organi"ntion. pleto doextraordinary things. culture we had to change Eror The TQM Education Process,team ac- With quality people, we beto implement TQM intivities, and the company print media and lieve that everything else folcluded: .Focw toward the satisposters and bulletin boards improved com- low: quality product, quality munication, resulting in a mor€ effective or- service and quality working faction of intemal and exganization. Quality partnerships with envlrorunent. temal customersi .Decision - making by suppliers and customershave also been eslounglWe'vebeenpartioltablished and stengthened. larlv successfulin imDlementconcensus; .Teamwork vs. individual; Communication of safetyand good oper- rng-TQM in the quaiity of our prcducts and . Data versus opinion; ating practices enhanced prcdcutivity and our working environment. . Quality asthe solution, not the problem; the working mvironment. The participation .Continuous improvemenb of every employeein an envimnm€:ntstsess- WM - fr tty - tid'€ tts sAnffiE tt&r;rce to . Enlightened leadership; ing teamwork has improved morale, effi- WtWrotTQlt?wM sfpr6'sor . EmDowermmt; ciency and productivity. We have also yq$ @tnfaty's c|t?'nlE,8re W M to dwBa ePariicipation of all; and, sbearnlined such proceses as: planting op hartubMlQm . Monetary awards and other forms of rccerations, orderin& requisitionin& vacation processing etc. We have also improved our SanMatoo ln recentvears,we haveenhanced omihon. casefillrequiiements. eachemployee'sindividual capacityfor per- Javelca The bittct difficulty we had was in JavebaaMotorola's fundamentalobiectiveof sonalcontribution through training and edu- developing a culture that rclates everlthing total customersatisfactionhaselimiruted all catio4 and have encouraged a;.tdnurturcd we do to a customer need. We work at a boundaries in the marurerby which we pro- innovationand a senseofpersonalownership manufacturing site and we arc not regularly vide products o! services.After all, when we of the businessthrough participation in man- in touch with the customers who use our arein the cwtorner's role,we arc not satisfied agementdecisionsand delegationof respon- products and services.In this situatio4 cuswith compmmises.Gefting the bestof every- sibility and accountabiliry tomer Hback was difficult to obtah on a thing is a basiccustomerexpectation. Accessto comDanyinformation oncecon- real time basis.And without feedback it was HatrruDrno In terms of our sideredconfidentialgivesall difficult to motivate people to rcspond to the producs, Dole Thailand has employeesa view of the big quality imprcvement challenge. "D€l Monte'g goneftom a purely quality aspicture and the company's To deal with this situatiory we embarked surancesystemwhere a sepadirections and each em- on an effort to develoDan "iniemal customerefiolts to rate group inspects the ployeecandraw up his own supplier" relationshipcllture. Thismeantthat finished product after pro action plans defining his or each Motorolan within our organization intrcduce TQM duction to what we call "on her individual conhibution should treat the other Motoplans who rcnas t€allya steF line quality assurance." On in support of corporate ob- ceive his/her producb or servicesas a cusline quality assuranceis byctep pocess tectives.Theseinterventions tomer and that total customer satisfacnon - along with the sucr-sses should be keDtconstandvin mind. The measperfomedby theworkerswho that lnvolved actually produce the product. of numerousother improve- uremmt and-communicationsystemsI menThey make the measurement activities - have re- tioned darlier provided the "Motorolan incrcmental ments, they change to insue sulted in an organization Supplier" with ieal time feedback from his changeseeh standards arc meet, they are Orat is unfazed by change "Motorolan Customer" empowered to effect the and employeeswho, in fact, Hawthome When we were starting to immontt." quality of the pr0duct so it expect change and drive it plement TQM we often heard our employalways meetsour high standthemselves. eessay that, " We all have a full-time job ards. Ermr Stumbling blocks to already.How can we possibly do more?" In terms of service, the TQM implementation in- Through persistance and the accomplishmost difficult part of any adcluded intemal competition ment of some modest proiects we demonministration is to convince Iack of teamwork; not get- strated that continuous improvement employeesdi,atthey are there ting key people involved; actuatly made their jobs easierand more re to support the prccessof makand, managing employee warding. Mo6t found that etiminating unIHE ASIANi,ANAGER. FEBRUAFY1994

Ar.rJNvrrnrroN ToAsu:s Mosr PnEsTrcrous

THEGOVETNING SOARD

PNDSENTS

DR,WASHINCTON SYCIP CroupChairman ThesCV Group

rneAsian Management Awbrds

MnT{AGEMENTAwnRDS...

DR.BRIANW. SCOTT Chahman Maf,ag€meriFrontiersPty.ttd. DR.OAVIDK,P,II, O8T,'P Directof& Chieftx€culive TheSantof E.stAsia,!d.

ASSOCIATION IVITH

MR.'ACKTANC Chainnan Trisrar€HoldinSsLrd.

fim

Txe Asnx Mrtlce*rerlr

Amnos

THE SEARcH lro

Seleclox

DR,'ACDISHPARIKH Ma.ati.8 Dirc€tor t€e & Muirh€ad{lndiaPvl.ltd.)

PRocEss

TIfE PNINCIPAL SPONSOBS

PI.DT

th t"t ..".,tktb-

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N€PruNE oBlENr $rw,-

tlil

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aTlmmwn nnno ()Fsa^L Horets Hong Kong Hong Kong Hilton IrlaloEsia laksrta Hilton Intemational Malalsia Shangi-La Hot€l Kuala Lumpur PhiWifla Tle w6tin Philippine Pta"j Singapore H)'att Regencf Singapore 'I'l&iland Tbe Dusit Thani AmdAL Extn,,r ORcaNt2En Pi€o croup OFFrcw AwtT:oN ot 11it SElICH,{NDS&6cnoN ProcDss SGV/Arthur Anders€n OEncJ L PuBuc|TrrNs Hong KonB Sing Tao Daily Sing Tao Ev€ning Post The Standard lndonesia Tempo SwA S€mbada Malalria Star Publications Philiryines Th€ Philippire Star The Buriness Star Thailand Nation Publishingcroup Regional The Ashn Manag€r ORGANtztR The Eventsand Awards Managercof ,{sia (TIAMASIA)

THEAsrAN lNsrrurEoFMANAcEMTNT invitesyou to Through The Asian ManagementAwards, the join the annualsearchfor Asia'sbest-managed Asian lnstituteof Managementwill recognize organrzatons. for the fourth conse(ulive year deservingcompanies that have distinguishedthemselvesin Nominate a company you believe deserves sevenmanaSementcateEofles. recognition for excellent business performance. You can also nominate a not-for-profit Awardsceremonieswill take placeon February organizationthat has demonstratedmanage- 1 7 , 1 9 9 4a t T h e W e s t i nP h i l i p p i n eP l a z af o r t h e ment excellencein servingits tar8etbenefici- Philippinewinners, and in September1994 in a r i e s .\ o u m a v n o m i n d t ea s m a n y c o m p d n i e q Hong Kong, Indonesia,Malaysia, Singapore, asyou wish. andThailand.

NoMrN^rED oRcANrzATroNS will be senta datalorm which requires substantial datadisclosure b<-rth quantitative and qualitative regarding the companyand itspertormance.Datasubmittedistreated with utmostconfidentiality. A teamof AIM lacultymemberswill analyzethe information submitted and will shortlist the candidates.The informationprovidedby the shonlisted candidateswill then be validatedfor veracityprior to judgingby country-specificBoardsoi Judges.

Cmeeonre exo Tnetn Cnrenn Crrrner Merecrrarrr, Forsuccessin strategically positioningthe companywithin the industryand transforming it into an outstandingcompany.

rneAsian Management Awbrds

Mmxnrrc Mnrecrr,rrNr.Foroutstandingand suc- O p r * l r r o r . r sM l r e c r r a r r r . F o r o u t s t a n d i n g cessfulinnovationin the useof the elernentsand achievementin the qualityand deliveryof prodtoolsof marketing,leadingto customersatisfaction. ucts and servicesthrough high productivity, technoloSy innovation, and continuous imProprt DrwlopurNr llo Meucrr,rrlr. For excel- provement. lence in the managementand developmentof the people in the organization,geared towards DtvttopMtNrMANAGEMENT. For creatingsubstanproductivity,professional development, and en- tial and measurablepositiveimpacton itstarget hancementof the qualityof life. beneficiariesthrough innovative, sustainable, and effectivemanagement.This award is given FrNANcrAr MANAGIMTNT, For outstandingmanage- to a developmentorganizationwhich is primament 01 the company's assets,liabilitiesand rily notfor-profit and which has as its main equities,in keepingwith the owner'sbestlong- objectivethe improvementof the quality of life term interests. of people.

threesymbolisms. Firstis the dollar,representing profitability evolving from the organization'sperformance.Secondis the motto P/usU,ltra- there is more beyond: more to achieve- embodying a challengeto winningorganizations to continueto be competitive,dynamic,and successful.

From this emblem evolved the modern "$" symbol-the trro piilarsandthescroll-used for manyof the world'scurrencies.In fact,thereare

Third is the globe, illustratingthe new breed of managersneedgdfor the 1990s and beyond: gloDarmanagers.

fhe Far EasternEconomic Reviewwill featurethe Awardsin a specialatticle.The AsianManagerand the countrymerliasponsors will provideadditional editorialcoverage.

Sendto: TheProgrnm D ir€clor.TheAriao ManaSenrent Awards, c / o A s a n I n s l r l u t eo r M a n a g e m e n lk. ) 5 € p hR . M c M l c k i f g C n m p u s l,2 l P a s e od e R o x n sP , . O .B o x. 1 0 9 j ,M . r k n t iM , elro M a n i l a .P h i l l p p i n e r F a r l o :H d n SK o r E ( i l i 2 l 8 ; 7 5 0 ) 1 r l n d o n 6 i a l 6 2 2 15) 7 l J 2 1 0 6 * M d h y s ; r( 6 0 l ) 2 ' 1 ,I+6 9 6 | P h i l ! 4 t i n e t t 6 t 2 ) a 1972 4 0i t t ) l 1 6292 * Sinqaporc165)2912557 * Th.lil.tndt662) )i1ou6o

Y , S H 6 ,T A NS R I C E H I KC H E O N C Chairman D€\€loFnent & Comme.cialBank8hd. MR.VICENTT T, PAITRNO Chairman andMana8in8 Dircclor PhilippineS€venCoporalion MR,ANDRTS SORIANONI SanMiSuelCoryoraiion

DR.DUKCHOONCKIM

J InformationTechnologyManagement J Peoplef)evelopment and Management J

DevelopmentManagement

DaewooIndustrial Co.,tld. MR.PYONCHWOI KOO Chairma$ tucky'Col&larInlehalionalColporation MR,VIROIPHU]IAKUT Chai.man tever Bfolh€rcOhailard) ttd.

Your Name Position Company Address

L-

Fuii-Xercx Co.,Lld.

MR.ALANC.Y.YEO Chniman & Ma.ugiq Dire.tor YeoHiapS€n8Limited

FinancialManagement

Telephone Signature

MR-YOIAROKOBAYASHI

MR, HIRMAN RONAID HOCHSTADT Chakman tc:Cs HoldiitgsLtd.

Fax

ln the following categories(p/ea-se check): CeneralMana8ement MarketingManaSement ()perationsManagement

MR.RT'IROHATTORI Chairman Hatori SeikoCo.,Ltd.

MR,STANSHIH Chairman andCtO

N.rmeof OrSanization Address

-l J J -l

MR.OMARABDALLA Pre!idenlCommirsionef PTISJ DulaEank

MR.WANC CHIEN-SHI€N tegislato. Lee;slative Yuanot Repoblic o{ China

I nominatethe lbllowingorganization:

Telephone Name of PresidenVCEO/MD Title

MR.RACHMAT SATIH Pr6id€.1 Commilsioncr

TUN ISMAIL8IN MOHAMEDALI Chai.man National EquityCoDoration

Txe Nourrlrrox Fonv

lrrolrnerroN TEcHNoLocy MaNActMENr.For the creative use of informationtechnology to enhancethe competitivepositionof the company.

THr Asrar MANAGIMINT Awacostrophy is designedand executedin glassby multi-awarded internationalartist lmpy Pilapil. lt revivesan emblem usedby King CharlesI of Spain- the two pillarsof Herculesand the scrolledmotto Plus Ultn.

Thedecisionsof the Boardsof Judges aresubmittedto theCoverning Boardtor finalapproval. Thewinning organizatjons aretheninformedof theirselection in writing by the organizers. Announcements ot the winningorganizations will appear in leading localand regionalnewspapers and magazines.

MR.ADITYAV. BIRTA Chairman GrasimIndustri6Lld.

H.t. DR.AMNUAYVIRAVAN DeputyPdmeMinister Xin8domof Thailand MR.DAVIDK. NIWSICCINC R€ okjlcroup PLC

Fax Date IA\4r2 I

MR.WTTIAMS.ANDTRSON RetnedChairna. of th€ soad NCRCorporation

C O V E RS T O R Y

necessarywork and doing it right the first time was much easier than continuous reworking. Therewasn't much culture change requircd. We've alwavs been involved in prqecS and prccesserthat led to improve. ment.Wedid haveto systiematizewhat we are doing and this takessignificant training. MetcadoSincethejoint venturc wasstartedin 1 7, Mr. TesusDel Rosariohas alwavs emphasized discipline and the development of people. So the T@ concept was easily accepted in our company. Perhaps one difficultv that we enc-olrnter€dis thedifferencein culture betweenJapanese dnd Filipinos. Becauseour Japanese advisers are changed every five years, they have difficultv understandhs the needsand wants of Filipino consumers"ir,itialv Ho*ever,with thi proper feedbacksystem, they cameto understand the needsof the Filipino consumersover time. l€urE The major stumbling blocks are: difficulty in developing a problem ownership mentality; and, time management of work loads. On time managementof work loads, we ale still strugglinS to do a better job. C ydlnrcarcthe cc,b'fddtf''f/'t3d hnMEftIM? rlsp, tnw mrch ffi ftc'Ff o lnhrrrfqi? WM.bW Wt ful * the rctmts m srch I kuesntrlnt? San Mateo The primary driver of cost in rmplementin8 TQM hasbeen the investment madein training employees.lmplementing TQM hasrequiredchantesin the ways that jobs are performed, necessitatingupgrad-

D,elMonte'sfunllment of casonll

ing of skills and new knowledge,as Del Mo{t6'B c€t3 r'3. budgot well as preparing the individual for expanded responsibility and the managementof chante.Over thepast four years,employeeshave received an averageofoverfifty hoursof trainingand educationto preparethemfor their new roles. Other major investments have beenin the areasof information technology and manufacturingfacilities, which have allowed us to improve the quality of management and shorten accesstime and enhanceflexibilitv in the manufactureof our Droducts. ple can see their accomDlishments.From The returnson theseinvestmentscanbe projects that t€nerate hundreds of thousummed up quite easily: They represent sandsofdollars to small proiectsthat don't our ability to survive as a company in the generatemuch but takeaway impediments emergingmarket place. to qualiry you can seethe enthusiasmof E ror The costsand benefitsof TQM imple- employeeswho previously did notpaticimentationcaneasilybe measured. pate in improvementprograms. For costs,we maintaineda separateacThe real cost was in peoDle'stime and count.Excludingsalariesandwages,actual effort. We did hire consuliants to teach costswere asfollows: problem solving, processmanaging and In1992,our costsamountedto P901,000; systemsanalysisbut this didn't costmuch. in 1993,P5,165,000; a\d, in 1994,P-1,522,148.Weput togetherourown program to meet Ourbudget for 194was P4,831,000 and for our needsand thoseinvolvedboughtoffon 1995our budget was P3,235,000. the process.Jamming a camed program The rewardsare improved quality, pro- down people's throats doesn't promote ductivity,mordleand margins,through: support. . Reducedcvcletime: As I said earlier,our TQM protram rs . Improved iommunication; focusedprimdrily on continuousimproveo More efficientmanagers; ment. What we feel is the long-term rcrum o More productive workers;and, is thebelief that our employeeswill always . More satisfiedcustomers. be looking for better ways of doing things. To single out meeting casefill require- Totalquality managementis the goal; conments - which is the percentageof actual tinuous improvementis the means. supplied to orders received- the resultsare MercadoThe costof implementingTQM is demonstratedin our fulfillment. For rn- not a separatecost,but rather a part of our stan(e,in 1992,we met 72. of total or- operationalexpenses. As to retums,TQM is ders.In 193, this percentageincrcasedto a major factor in our continuedgrowth. 80',,. In Canadawe now supply 85"bof Laung The costsand benefitsof TQM are total ordeIsasopposedto 83%in 1992.In obvious in manufacturingoperations,in the Philippines,wenow supply97.5".of wnlcn we measute: . electricaland visual mechanicaldeorders as opposedto 95.5%. JavolosaWhile we measurethe cost of fectsat parts per billion level; . cost of non-conformance;and, implementingTQM. the company's leddershipdoesnottreatitasdco6tbutas r cumulative yield. a requirementand a worthwhile investThe levelofscrapreductionin Motoron ment.Today,the m.indsetis, "U it will Semiconductors wolldwide isphenomenal, bring us closerto total satisfaction,it has and it has contdbuted to sisnificant imto be done." provementin profitability. The benefitsare likewisemeasured In design operations, TQM results in in variousways:scrapreduction,in- higher rates of first pass successin new creasedsales,shorterleadtimes,fewer designs,i.vhichshortensthe time to market customer complaints, greater profits, and the break-eventime of new ptoducts. etc. ln service and administrative areas, Someortanizations need to seere- thereis no direct simple measurementthat turns on their bottom-linesto be con- tracksthe costsandbenefitsof implemenrvinced that TQM is a worthwhile ing TQM. We have recently restructured investment.We seequality as a baslc serviceareasto form a Customer Responrequirementto remaincomoetitive sivenessCenter(CRC),which is going to and theonlvwavto do thisisbvachiev- define visible metrics in this area. Meaning total customersatisfaction. while, we look at the bottom lines:overall Hawthome The benefits of TQM are return onnetassets,profit margin,salesper easytomeasure.Wekeepscoresopeo- employeeand market share.I THEASIAI\MANAGER. FEBRUARY 1994

FEATURE

.Theo

tpprnes TheASEANFrceTrade Areaprovidesthe Phlllpplnesan opportunlty to reverselts decades.long economlcdecllne. 8Y FELIPE8. AI"FOI{SO PRESIDEI{I ASIA I slnulE oF I'ANAGE Em

ano

AFTA

conomically- aswell aspolitically- the world has . Third -with the excqrtion of Korea- by encouragF . changed more ra pid ly in the past few yeaE than at any ing a hemendousratieof savingsand then hamessingthese I time since 1945.And no continent has been transresourcesto finance developmenuanc, I I form(d so radically in the past two drades than Asia . lasdy, thesecountriescho6eto aggressivelypromote - now the biggest,most varied, most creatively d1'namic exports asa way tiospeedup much of *rc industrialization economy in the wotld. phasethen thought to be essentialto progess. Compared to the restof developing Asia, Japanis in the Asia's secondgenerationof MCs: lndonesia,Malaysia, economicstratosphere.Ib successstory waswhat first made Thailand.China and Metnam - emergingdragonsin iheir peoplecontcmplatea Pacificflowering. own right - are also important players in Asia's rcmarkAnd hdeed, it soonbecameclearthat the rise ofJapan ablesuccessstory asan economicpower was not an isolated phenomenon. Japan'ssuccesswas followed in the 1970sbt the meteoric Indone3la growth of SouthKorea,Taiwan,Hong Kong and SingaThe world's largestMwlirn nation is alsoAsia'snextbig pore - cotrntries which have achieved spectacular growth market. growth and industrialization through the implementa- One hundr€d eighty€ix milUon Indonesiansrepr€sent tion ofa variety ofpolicies that, at their most basic,have the rcgion's mo6t populow nation and the foreign invesmade effective use of available resources- which were tor's currentdarling.lndonesia'spopulationis grnwingat sometimesvery limited- and have beenexportdriven. 2.3o'o, a rateslightltlower than that of the Philifpines."An Take Hong Kont and archipelago compris€d of Singaporefor instance,both over 13,600islands,Indone. city-stateswith virtually no ASEAN ECONOI'Y IS sia's land area is almost ASEAN I{EE}S AFTA TO natural resources. Both REAOYFOFAFTA GROWFURTHER seventimes that of the Philopted to become freeports ippines. and to act as conduits for Buoyant oil and comthe flow of trade and investmodity prices fuelled the zF:!m ments. country's growth ftom the '50s to rtI On theothu hand,Japan, the '70s. More Ie South Korea and Taiwan, cmdy Indonesiahasunder,,offi o,"o".. p' optredto develop: taken sustained efforts to s l o First, by encowaging l divenify its economy - a rS import-substituting domeslesson learned from the of tic industries; 1986-89recession,when . Second, by imposing o $ r5 s o o ota 6410200/o$ot!o weak world pricesfor cmde agrarian reform as a means @PCCI lF@tn Chsb.r oil plagued the count4zThe to bolster domestic markets; recessionwascathartic,and

wry "",'*.gl **",r" fi

IHE ASIANMANAGER. FEBRUARY 1994

FEATURE

forced the Suhartogovemment to make major policy changesand initiate a pr()8ram of economic reforms aimed at liberalizing the economv Today,very liftle of Indonesia's growurg prosp€rity hastiodo with its vastoil resources. In fact,the entire complexion of the country's exports hasbeentransformeda being largely commodity driven bas€to a non-oil exports, manufachrles. ln the last decade,the percentageshareof oil and gas revenuesof Indonesia'sGDP fell by almost hali from 68.6p€rcentto 39.1percmt, In contrast,merchandiseexporb grew by over 28percenL from $18.5billion in 1985to almost $24billion in 1992,in conhast to the Philippines' total of $9.82billion. This year, lndonesia'smerchandiseexDorbar€exoecd to reach39 billion. Manufacturing now accountsfor 21 percent of Indonesia'stotal GDll Six years ago, manufacturing comprised a mer€ 16percent of GDP By comparison, the Philippines' manufacturing sector comprised 25 percent of GDP in 1985,a figure that hasvery negligibly changedin the last 5-6 years. Drect foreim investments in lndoneua have increasedio 1.5biltion dollars from $300 million in 1985during thenation'scrisisyears. Morc notablt investments from Japannow approximaie total Japaneseinvestrnentby in Malaysia and Thailand annually. As a result of the Suharto govemment's far-reachingpolicy changesat the 80't lndonesianow postsan averagegrowth rateof670, placing well aheadof the Philippine' 2 percent growth.

Malay3la

mulas that propelled Singapore,Hong Kong, SouthKoreaand Taiwan into the ranks of the newly industrialized. Like most of its ASEAN neighbours,Thailand was an exporter of primary commodities.As lateasthe 1970s,the country'sexports wer€primarily agicul tural:Thailand remains one of the world's largestrice and tapioca exporters. h the early '80s,however, Thailand also chose to go in" direction of exportdriven growth. In the last decade,Thailand attracted consistently strong foreign investment as a r€sult of its export-oriented prcduction policies, cheap labor, an undervalued currency and a minimum of govemment intervention. Highly deregulated since the '70s, virtually every area of the Thai economy is open to investment, and the government has been known to apprcve forcign economicvenhues into industries where existing govemment or government-related corporationsoperate. Suchpolicieshave amomted to a formula for sustained growth. By the late '80s,Japaneseowned and joint-venture factorieswere sprouting at a mte of oneevery two and a half days. In 1990-91,foreign investments amomted to $2billion. Merchandiseexports continue to grow at a steady pace. Exports open, competitive economy. Merchandise werc clos€to $3Obillion in 1992,up from $7 exports - primarily semiconductors and billion in 1985. eleckonic goods - increasedfrom $15.5bilAlthough, Thailand's overheated lion in 1985to,l0 billion dollars in 192. The economy appears to be slowing - double cor.mtry'sfuture economic course is clearly digit growth hasbeenreplacedby more realmoving in thedirectionofmore sophisticated, istic figures - Thailand still draws a large capital-intensive technologies and export- shareof foreign hvestrnent. ln 1990,it was orientedindustries.It is the largestexporterof third in the regron, after Singapore, which silicon chips in the world. managedto brhg in the iion's shar€of investAs a result of incrcasedmerchandiseex- ment, and Malaysia. ports and substantial foreign direct investAt present,Thailand is facing stiff compements amounting to over $4 billion annually tition from lndonesia, with its large popula- an amount about eight times that of the tion and abundant raw materials,but Philippines - Malaysia boasts an annual Thailand's proximity to IndoChina's emerggrowth rateofnine percent,oneof the highest ing baht economiesensues tllat it will retain --in the near future at least - some of its in ASEAN. original allur€ to for€ign investors.

11,n*, impactof

AFIA may

not be

tu]tbr

anothel

decade."

Malaysia has a population of 19 million, lessthan a third of that of the Philippines. It is a prosperous,developing nation - oneof the region's mo6t d).namic - which enjoys a tremendous wealth of natural rcsources,including much of the world's supply of tin, rubber and palm oil. thailand Uke Indbnesia,Malaysia's growth in the With a land area larger than the Philip- Chinaand Vietnam '50sand '70swas largely dependenton com- phes, 43percentof which is cultivated, ThaiAny discussion of foreign investment in modity exports and like most of its Asian land was one of Asia's fi$t "litde dragon" the region and Asia's glowth market must neighbours, Malaysia embarked on an im- economies,having adoptedthe succesifor- include China and \4eham. port substitution strategy in the '60s China is notable, particularly for and '70s. the size of its market. Govenment The countrv exported mbber and continues to encourage the opening IS AFTA A THREATTO YOUR COMPANY'S OPERATIONS tin in the sameway as the Philippines up of the domesticeconomyto foreign relied on its sugar and other primary investment. E PHIUPPIN€S commodity exports; Thailand on rice Although China is still predomi! SING,qPOFE and tapioca;an4 Indonesiaon export nandy agricuitural, specialenclavesof d i I TIiA(AND of oil and natwal eas. industrializ-ation are slowly coaxing .:] IN@NESIA UI(e Indonesia, Malaysia has also China onto the world siage as one of chosento dive$ifv itsexDorts.Betwen the next cmturv's economic powerthe tate '70s and'80s, Prime Minister houses.For instance,in the first nine Mahathir Mohamad'sgovernmentini10 months of this year alone,dpproxitiad an export-orimted program of mately $83 billion worth of foreign -flooo 0 indushial development characterized investment found their way into by policies aimed at promoting an China.Ard China's economygrew by 2.

lHE ASlAl{MANAGER. FEBRUAFY199./t

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FEATURE

a spectacular14.5percent- faster than any other Asian country. Metnam,on theotherhand, is increasingly attractivebecauseof its supply ofcheap labor. At present,Viehram shows everv indication of haturing into a high-speed, export-oriented MC. Towards the cloeeof the centurv, Metnam mdy well becomeone of Asia'smo6t favoureddestinationsfor forcign investmmt.

11^,^.

survey thus far has been 11.3 per cent, a rcasonablepercentagewhich providesavalid indication of the average Filipino businessperson'sperceptionsof AFIA. The opinions that follow focuson the following areas:the respondents'agrcemmt or disagreemmt on thed iffering percepbonsre. gardingAFIA;theirass€ssmentof howAFTA will affect&e r€sion aswell asthemselveson two different tevels- in theindustry towhich Le3sonsLeamed? they belong and on the company level; the What do the e4rcriencesof the little dragstrategicoptions theL companiesshould cononsteachus?Verysimply, that the most effecsider in the advent of AFIA; and their opinion tive policies - if we ate to achiwe rapid on govemmmfs role in AFIA. growth - should embody the principles of The rcsults then, suggest: economic liberalization, substantial foreiFfl . General PerceDtionsof AFrA inveshnent and export driven growth. AU;f A majority of respondentsfrom the IICCI theseprinciplesareinter<onnectredand work a$ee that ASEAN is ready for AFIA. Rebestwhen they ar€appliedwholesale. spendentsfrcm amongthe foreignchamben, As we've iust seen,hdonesia, Malaysia however,areunsureof the region'spreparedand Thailand incorporated thesepolicies nes6for AFIA. Bothsetsof rcspondentsagree to build links to the glo6al marketplaci - the dratAFIA simpact will onlv befelt aftei slx ro source of a steady inllux of outside capital, ten yearsof imiiementatio;. Basedoninitial investmmts and technology - as well as to findhgs of the surveys sent to our ASEAN the market in which to sell their exDorts. neighbours, Indonesians and Singaporeans The secondgeneration dragoni are well also agr€e that the full impact of AFTA will on theil way to becomingprosperous,indusonly be felt after si\ to tm years. MalaysiarE trialized countries prcciselv becauseof their and Thais, however, feel that chanses will enlightened,exportdrivenievelopmmtpolista to be felt in the region after 11-13years. cies.The Philippines, must do the same:liber- nessedunder AFIA. . Impact of AFIA at the industry level alize, attractforcim investmentsand comrru( RegardingAFIA's impact on local indusitself to export promotion. AFIASuruey tries,i€spondentsfrom both the ItCI and the AFTA is the bridge that the Philippines I think a maiority of the Philippine.busi- foreign ihambers agreethat AFIA wi for€e needsto link itseUto dreglobal economj,and nesscommunity ralize this, aswell asappre- their industriestobecomemoreglobally comcapture its legitimate shar€ of financial re. ciatethe other benefits that AFIA wil brins. petitive. AFIA, they say,will alsoincneasethe sourcesand markets.Thailand, Malavsiaand Many realize tlut AFIA will enhance our level of foreim dir€ct investment into the latjely,lndonesia, have followed thd simple country's competitivenessand prcductiviry country and increaseintra-Asian trade. It is formula of building bridges to the global In today'stlobal economythereis no placefor inier€sting to noie, hqwevet that our remarketplace. And now they want those protectionism or similar interventionist poli- spondentsfrom among the foreign hade repbridffs to ,be wider and stronger still cies.Theseonly serveto hinder export expan- iesentatives are more optimistic about the through AFIA. slon. influx of foreiqn investment as a result of By providing a unified market, AFIA B€forewe discussthefindings of theAFIA AFIA s irnplemmtation. makes the entire region atbactive to forcign suwey - the secondportion of olu Dr€sentaA majority of respondentsftom both the "good" investors and will no doubt athact tion - let me brieflyiescribe the miethodby IrCCI and foreign chambers also recognize M NCs- tho6ethat seekacompetitive basein which the suwey was conducted. that AFIA will bring about far-reaching the global marketplaceand promote specialilast October, several thousand survey changes,such asevolution of industry struczation and the division of labor betweer na- questionnaireswere distributed throughout turcs.Bothgroupsremainconfidmtthat multions as opposed to MNCS that seek or y theASEANcountries-excludine Brunei.ln tinationals will not dominatre in any one protecd markets. the Philippines, 1,570survey forrns were sent rnoustry. Perhapswithin this d'.ndmic,potentiauy to various IrCCI membersand foreig dnm. Impact of AFTA on the company level lucrativemarket,the Philippinesmay again ber representatives.The responserite fot the There are two key points that emerged be given the chanceto becomethe new ftom our survey regarding the impact prefered investment destination beofAFIAat the comDanvlevel. The first caue of the quality of its worKorce. has to do with the-perceivedthreat to WAYS TO E(PAND TO OTHERASEAN COUNTRIES The type of skills and rnanagerialmancompany opelations; and the second, power we arc fortunatreto have develwith the sowcesof thesethJ€ats. oped arc the exact assetsthat forcign Perceptions varv as to whether business values highly. Many of the AFIA presentsa threat to the r€spondASEAN countries which receivedbilert's company. Fifty-one percent of lions in foreigndiect investmentin the respondents claim that their compa'80s now suffer severe shortages of nies' operationswill not be theatened managersand engineers. Herc in the by AFIA. However, 1ry. rcsponded Philippines, many of our middle manthat their companieswill be threatened agers and engineers alle either sadly by AFIA s imFlementation. unemployedon:nderemployed. Then In comparison to our neighbors, skills and talents can certainly be harFilipino businessexprssed a greater

AFTAsurvey,

the Philippines

is neither

mentionedas

an oppoftunity nol a threat."

THEP6IANMANAGER. FEBRUAFY 1994

FEA?URE

level of conlidence in the ability of their companiesto stay ahead of the competition despite increasedcompetition as a result of AFIA. Singaporearuand Malaysiaru, however,expressedmoreconJidencein their companiesthan the Filipino rcspondents. Regarding souces of perceived thrcats, the IrCCI respondentsidentified new industry entrantsasthe highestthreat to their companies,while a maiority of foreign chamber members said that the emersenceof substitute ploducts should be a major souce of concem. In a ranking of the ASEAN counbies as thrcatsin termsof mtrv intoindusDerceived -tries, both groups shared comrnon choices. Singapore,IndonesiaandThailandwereidmtified as the toD thr€e threats to local industries. Respondents from other ASEAN countries also indicated Indonesia,Thailand and Singaporeasthreats.ThePhilippineswas not mendoned. . AFIA strat€ties of respondents In the survey,rcspondentswerc askedto evaluatevarious stratregiesto pu6ue within theAFIA framework. The first involved stsategic decisionssuch as expandhg into other ASEAN coutries through exports, thrcugh strategicalliances,thmughioint venturcsand through mergers and acquisitioru. The second involved the choice of destirution for inveshnents,while the third involved what methods to introduce or utilize to enhance comDetitiveness. ltre respondentsranked develqring exports asthe number onestrategyto pu$ue in expanding throughout ASEAN. Their second choicewasthroughestablishingsbatregic alliances. Similarly, a matority of Malaysian,lnde nesianand Singaporeanrespondenb agr€ed that exportdrivenFowthwas the shategyof choice.The Thais,howeve4,felt that developing strategic alliances - establishing joint vmtwes and expansionof new foreignoperations - were as essential as expansion through the development of exports. ln termsof invesunentdirections,the Philippine respondentsagreedthat hvesting domesticallywas an important shategicoptiorl A majority of Indonesian r€spondentsalso said that it was important to invest at home, whereastheThaissaid it was morc imDortant to invest in othe! ASEAN countri€s. Re8ardingsEategiesto competemore effectively,the Philippine respondent'stop optiors were emphasison quality conhol and attaining lower costs. Another option mentioned specfically by theI]CCI group was the importanceofdeveloping new technology.A majority of the for€ign chamberrespondmts felt that a shilt in the soucing of inputs was also imDortant The- survev's ASEAN respondents revealed differeirt opinioru. The Malaysrans str€ssedthe importanceof automationin pro. . THEASIANN4ANAGER FEBRUARY.1994

/ ( , .

plevailing mq)d towards

s€cond most important determinant while Indonesians rated interests rates second on theft list of important factoE affecting succ€ss. A maiority of Philippine respondents agreedhowever that goverNnent would become more outward looking as a result of AFIA. For the most part, the respondentsfelt that AFIA will strensthenASEAN'S linls to the targer world economy and as a r€6ult of AFIA simplementatiorytheregionwould be convenimtly "interlocked" with the rest of the global marketplace.

lmplications

The partial returns on the survey thus rcveal severalimDortant develoDments: Fi$t, the prev;iling mood towardsAFlA appearsto be one of readinessto acceptthe new rcsional order and faith in the determinahonof the variousASEAN sovernmenisto effect this new order It is espkiallv interesring to note that the Philipp-ine respondenS appear tio have the same perception of urgency for AFIA as the Singaporeansand Indonesiaru. Second,the general oudook on AFIA is optimisfc and positive. This upbeat view is exemplified by the thinking that the region willnotbedominatedby multinationals, provided that the playing field is level for indigductionmethods;amaiority ofThais consider mous as well as non-indigenous companies achieving lower costs important; the within the AFIA framework. Singaporearu stongly fuel that differentiaThird, very few of the respondents see tion in products and service will provide a AFIAas a thrcat tjotheircompaniesorrcspeccompetitive edge; while Indonesian's said tive industries.lnstead,the majority ofPhilipthey would divenify. pine respondmts seeAFIA providing new r Role of govemnent opportunities and chatlmges. This despite The last asDectof the suwevfocused on the Philippines having laggedbehind the rest govemrnmfs-role in the imphhentation of of the rcgion in its economicdevelopment. AFIA. A majority of r€spondentssaid that Fourth, rivals havebeenidentified - spethey felt that govemmerrt was not dear and cificalJy,lndonesia,Singaporeand Thai-tand. banspar€ntin its policy towardsAFlA. Only Asignificantnumber of iespondentsseethese asmall number ofPhilippine rcspondentsfelt three countries as skonger as a rcsult of that govemment was pu$uing its AFIA advanced technology and ioint ventures, policy in a manner that was clear and trans- cheaper production inputs and Breater rcparcnt. sources. The Philipphes, confident of its As to which policy arcasthe rcspondents higNy skilled worKorce, has identified the felt would have greaterimpact on the success need to concenhateon total quality asa way or failur€ ofAFIAstmtegies, the IrCCi consid- of competing in the rcgional economy. erspolitical unity and stability the most critiFifth,govemmenthasto do moref oTAFIA cal factor to AFIA'S success.Foreigndumber in termsof information diss€minationso that respondentsconsiderasound laborand wage the bushess s€ctorcanmake long-term plans policy morc important. Of secondaryimpor- and formulate developmentsEategies.Aunitanceto the IrCCI is the pres€nceof adequate fied, more outward vision of the future u infrastruchle, while those from the foreigr necessaryif the Philippines is to survive in chamberscoruidered political unitv and saa- thenewhighlycompetitiveeconomicenvibility a secondaryconiideration. ronment. Elsewhere in ASEAN, rsults indicated AFTA presentsa unique opportunity for that all coutry respondentsagreethat politi- Philippine industry to develop the momencal stability and political unity are the most tum and synergy necessaryto overcomethe important determinants of AFIlls success. obstaclesthat have - in the Dast- seriMalaysians and Singaporeans - who are ouslv Dreventedthis resource-dchnauon currenuy beset by labor shortages- also from ichieving the progress that we are corsider labor and wage policy a critical fac- now witnessing throughout the entire tor. The Thais ranked corDoratetaxesas the ASEANresion. I

AFIA appearc

to be oneof

leadiness."

FEATURE

and HRM is imperative for businessto meet new global competitive standards.

BYJAct ro C. cAvtNo,DpA

"lt b encolraglrEto noto that man.go.! tod.y .|! notlcaaHymoroh..ltdrt to lot go ot omploF.e who ar! 3om6ivhatlacklrE h togdthc,llno*llb,"

ASSOCIAI€DEAN ASIAI{ II{STITUTE oF MANAGEMENT

anagersand academicianshave only, in the past decade or so, begun to recognize the strategic importance of human resourcesand huma_nreI I I sourcedevelopment.Any company'sfuture successdepends lalgelyon its employies'uniqui attributesspecificalJy,the skills and insight of its workforce and how well theseskills and insights arc enhancedand linked to industry and thelargerec6nomy.Therearesomethings you canoversimplify and overemphdsize,but never *|ls: people area companys mostlmportantresource. Historically,HR hmctionsop€rad in a separatedepartTent providing its own setof solutions to its perceptionof the company's human resourceproblems. -heated Similarly, employee-relatedissueswer€ often as peripheial administrative problems in an organization'siong-term strategy.Training was thought of only asan e\penseor dsa long-terminveshnentwherercturnswered ifficult toquantify. Busines:eshad thetendencyto under-invesrin trainin s and education as in researchand development becau-se oY the problemof the competitionreapingthe results. -Becaus€of the various challengesconfronting business today, HRM and employee training are now c"onsidered intrinsicallyvaluableactivitieshdfilling a stratetic role along with other business and management firnctions. More importdntly, HI{ specialistshavetalen theini tiative in guding toplevel decision-makhgdndenablingmanagers and execuhves[o copewith changesin the workplacebv providing new and effrtive methods of managrrg ani leadine. Whataresomeof thesechallengesthathavebroughtHRM to the foteftontof managem€nt? Biiefly,they includi: htemational competition and the way' in .. lqofrg which_informationtrJrrology is speedingup business; .. Hlgher,moreeLactintcompetitivestandards,induding quality, vaiety, crtstomization,convq$erKeand crntinuous lmovauo(l; 26

. Theinceasmgcomplexityandsizeofo€anizatims; and . Theemergenceof Theemergenceofaaworkforcethatisetermotesoohismoresophisticated and lesslikely to sacrificequality of life for promotiorsts ano and rugner higher Pay. There are perhaps a number of other challenges,but I - in the think rk these thes€are the four mo6timportant imDortantthat thathave have-immediatjepast- given managbrscausefor someorganizational introspectionand have fitther challengedthem to redefineHRM's rolein main s role maintdininp comrr..lnv's romnptitdining a compdny's competi-

new emphasis is on training programs and revitalization of the workolace.YetAmerica's efforts still fall short of japan and Er.uope. David Osbome, author ol Lqfuntoriesof Democracy, writes that one to two p€rcmt of all workers inJapan,Germany,Franceand Swe den rcceivehaining at any given tine, In the Unid States,the figure is one-tenth of one -Dercmi. Ftaving placed a new pemium on ttainin& the Clinton administration in the United Staies has proposed that every employer spmd 1.5%of paFol for continuing education and haining for all workers - not just executives.Executiveeducationis alsocatchingon:Anestimated US$12billion is spenton executiveeducation every vear.Thesesums are expectedto grow asiompanies continue to exDandand intemationalize. Fortune 500companiesand their equivalents in Euope and Japan are making substantial inveshn€nts in Eainins centers to further educateand upgrade thiknowledge and skills oftheir martagersand rank-and-file employees.Asian organizations arc starting to get into the act too - although on a somewhat smaller rale. And well they should start, for the dEllenges of international competition facing Asia arc daunting and immediate.

tiveness. Tilday's's bwiness businessenvitonment environment dictates dictates that tlut HRM

overstep the boundaries of ils own specific function, and enhanceits effectivenessby involvingivery prhcipal manager in the organization - the birsiness'rnaniger, the functional managersin marketin& operationsand finalce - and not irrst the pen onnel managerin the training and devetopmentoi emploVees.

InvertedPyramid As morc companiestake on the inverted pfamid approach of empowerment and cultivate high<ommitment work ctrltures,HRM will be catledon to assumea more siSnificantrole in the organization. As one HR practitioner puts it, "The more organizationsopen up and give people ownershipof theiractionsaswcllai encourage"theiiabiiity to managethemselves,the mote I seeour responsibilities changingfor the better."Happily,many companiestoday have cometo apprcciatebaining asan integral part of their operationsstrategiesand rccognizethat variousHRM 6.rnctions contribute to the major changesrequiredby organizahons to maintain or restoie competitive edge. Developmentsin thebusinessiorld reflit thegrowhg importance importanceof leamingin the workplace.Americais in the " revivdl." American midst midstofa of atraining trdinins "revival. A mericanemployers emoloversspend soe,nd an estimated$30billion on training eachyear and blue chip cornpaniesmay spend an eshmated comParues estimatedthreeto sevenpercent of their palroll on training.AcrosscorporateAmericathe

. FEBBUARY THEASIANMANAGER Is.4

NewChallerges The emerg€nceof maior, largely interde pendent economic blocs such as AFTA, NAFIA and the EC meansthat most barrieE to the free flow of people, money, ptoducts THEASIANMANAGER. FEBRUARY1994

FEATURE

computer and related new technologiesef- OneCompany's Example fectively if they are to prcduce better prodOne Asian company that hasmanagedto ucts and deliver better service. l tthout inteeratjeHRM into the mainstreamof mansuperior customerservice,efforts to improve agemmt is Sarawak Shell Berhad. Several product quality will probably be wasted. yearsago,SSBintroduced what the company Thenewlv comDetitiveenvircnment also calls its Human ResourceStlateg/, or HRS. requiresnew,inventive approachestowards SSB'sunderly'rngphilosophy holds that every quality - whether it involves redefining line manager is also a personnel manager markets, organizational structures or proc- who should play an activerole in conceptualesses- which makes it necessaryto retum izing, developing and implementing all perto a company's traditional strengths: the sornel policies and svstems.A true advocatje initiative and determination of its employ- of the leaming orginization culture, SSB ees. spends substantial amounts up8rading its Studiesshow that about 40% of competi- employees' skills and expertise.Where the tive improvements come from things busi- taining expendihre norm tluoughout the nessesacquire - machines, infrastructuJe, regionis severalthousandsofdollars per year, skilled and educatedemplovees.Thercmain- SSBinvests clos€to US$9,000 arurually per ing 60percentcanbeleamed'intheworkplace. employee. Cutting-edge Motorola SemiconEducation and haining enableemployeesto ductoG Ltd. in Hong Kong spends over become steadily more valuable as insights $16500per employeeper year leamed on the iob and acquired in the classOf couse, it is nothow much vou spendon room lead to new insishb. At the sametime your employeesevery year-alihough this is they give bwinesses a powerfirl boost in the sometimesa good indicato! of how commrtraceup the learning curve. tedacompanyistoHRM-buthowyou hain them and whether vou have "empowered" them sufficiently to make the moit of their newlv-acquircd ski[s. Financial rewards are no longer-enoughfor most employees.Their new priorities include more autonomy,more on-the-job cha.tlengesand opportunities for p€rsonalgrowth. . SSB'SHRM program is successfirlprecisely becauseit is characterizedby a hithinvolvement cultur€ that brings the decision making processdown to the rank-and-file level. One of the company's many improvement programs is the Quality Imprcvement SuggestionScheme and theQuality Improvement Project that encouage employees to generate,identify and implement ideas that at6DX2 Inr.l clet'ddblitrg 66.MH. {86DX2 will improve the company's overall quality Pt@ei orInrclS3-MHZ4E6nicroo.a.sr and prcductivity. The over 900 ideas generUpand.bilitr Clip upsB.labl. with a.r.rt a.<l ated by 3,1,10SSBemployeesevery year intutu.c Or.rddvc Prdctsr f.m l.rel clude rccorrmendationsdesignedto improve M.a*t 32-tthy3t.h nchory.xprnid to 128MB custromerserviceor speedupproduction techon rh. ry .h bo.rdliingindlitry3rand.rd SIMMS niques. Forty percent of these ideas are aF 3 I /2.inch| ,rl4M.B.byr€ DBl.x. driv. plied at one time or another in the rtandlrd: S.v.tr .dd'l'ond ha$ tl6r.s€ organization. d.qe po3'rrmrwirh cont.ncnr.cce$ Thus, through such programs, S.9Bhas E ghr 8r1682-bn EISA b!3-na!'crilor3 managed to createa workhg environment SCSI-2:ncr*ora par.ll.l: lwo.e nal; that encouragesa high degreeof employee sraphic. tcybo.rd .id poiixnB d€vi.. involvemmt and rcwards them with a sense of ownenhip in jobs and proiects.Empowerhr.thted102a r 76{ noii .,l'..d ment, haining and education go hand-inhand. As one HRM practitioner sayg "By 2aGvlrt Pow.r Slpply giving your employeeslnowledge, you also give them the power that forms the basisfor making decisions." --

and ideas will eventually come tumbling down. Competition will be fierce,notjust for nations striving to compete for foreign markets,but on a smallerscale,for companies that intend to keep pace with the best companiesin the world. Worldwidecompetition is forcing companies toward the hither grourld of specialized products and services.Price-basedcomp€tition no longer demonshatesits oncepervasive hold on the new economy. Comtetitive standards have changed,placing new demands on employees- particularlv those involved in the of produition, of servicedelivery and customer relations. But this is often wher€ many of our leasthained employees work. Because of the growing emphasis down the line in providing value, employers are discoverhg the need to train more equitably. For instance, where prcviously employeescould make do with a basic grasp of a growing number of computerprotrams, it hasnow becomeim. perative for employees to leam to use the

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Devolutlon of Authodty It is interesting to note how the growing importanceof HRM and the factorsthat gave rise to it have altered organizational structures, ways of delegating authority and assertingleadership.leading organizationsare moving towardshigh-performancework syslHE ASIANMANAGER. FEBRUARYl9O4

Questions &Answers on Social Securitv

SSSlmplements l{ew Gontribution Schedule Effective January'l, 1994,SSS,willinrplement schedule in linewith the uodatedSSScontribulion itsprogralllto increase the maximumrnonthly salarycreditfromP6,000to F7,000. Sincetlresalarycreditformsthe basisfor thebenetitsof membersandtheir compuling beneficiaries, thus,the newsalaryschedule trans-

latesto higlrerbenelitpackages lhatarenrore realistic ar)dnreaningful. Thisis particrrlarly inrporin theirtimesof need. tanlforrlrenlbers Adjustments in contributior)s as showtrin lhese lables(inbokltypes)willcoveronlythoseearning P6,250andabove.

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,rifiii'^qu' Zi SOCIAL SECURITYSYSTEM

sss/06E/93

FEATURE

tems that arc far removed from the elitist systemsthat worked in the old, massproduction economycharacterizedby stabilrry Top down, directive -urugem"nt styles are'a dring of the past and we now hear of seudirected teamswhich emphasizeautonomy ano teamwork. Companiesare doing away with ossified layersof managementbecausethe new international economyhasmadethedevolution of authority not just fashionablenor politically coEect, but necessary. Where in the past managers increasedautomation and hired less skilled worke$ to cut down on co6ts, managersnow realizethat unskilled wotkers and rigrd technolo$esareonlygood forhighvolume,standardizedprcduction and cannot produce the state-of-the-art, customized prcducts tlut are currmtly being sought in ihe globai markeglace. A recentsurvey by the American Bureau of kbor and Stati;ticaestimatesthat by 2005. most iobs will be concentraH largely in proiessional, technical and managemeit sfecialities. Employmmt in ttrc ;;nuJachiring ind ustry is expecd to decreasebv thee percent.Computerprogrammlngwiti bethe fastest growhg industry, increashg 56.?,ftom 1990.On thewhole, morc whitecollar iobsare expectedasthe number of executive,administrative and managerial employees |s expected to clirnb by 27-,..As we move into the ne\t century,specializedknowledge will account for j larger portion of reienues ur practically a.tlindustries. Theseaie American statistics,but I think its safeto say that we will be experimcing a similar hend herc in Asia. But eranted that high-volume production hasn'ibeen completely rcjecd, competitivenessin massproduced commodities will still reouire continuous improvement that only ivellhained, skill€d employeescan provide.

"leadit€ organizatifisare movlngtoryards highpeftmarce wolksystemsthd arcfar rcmoved ftomthe elitlst systemsthd workedin theold, massproduction econotny."

makeiniormed careerdecisioru and dwelop Ereir skillsalongtlresepa&ule sAive to producemanagenwhcekpwledqeand attitudesare relevait and ' usefulb business. As teachersand hainers though, we sometimes tend to fo€et that theonus of teachingrests with us. We think that if the studentsfail to leam, it is entirely thetufault that they're simply too obtuseto grasp what we have iust taught them. But this isn't the way things work - our goal should be nothing less than to make certain that the student or the employee walks out of the classroom or training seminar with some "value-added" aftitude, skill orknowledgewhich will either serve him h good stead in a futule career or help him irnprove the qualiw of everv Droduct and serviceoffered'by his company.'lt s a simple 'to message,but on; I try not loeesieht of:-"lf the student does nof leam, the teaiher does not teach." But in theworkplace- asin theclassrcom - what one leams the mo6t from doesnt always necessarilyhave to be what is right or what is the accepd way of doing things. Many of the mosfthouehtlprcvokini q$cussions in tie dassroom have resultied from someattemptonthestudent'spalt tocomeup with a theory - however narent or flawd - a: to why works or doesn't worK. FomalEducatlon andEducation ln tho Mistakes or half-mistakesare sometirnes Wo]kplace thebestteachingtools.Somecompanieshave At this point, may I digresssomewhatand evm made it a point to recomize mistake say thdt ultimately, I would like to seemorc whign proved to be the best"teachingtool. shatiegicalLiancesbetw€encolporations and And indeed, it's much better to take i conmanagemmt institutioru in such arcasasde- structive approach to mistakesbecauseit is veloping strategy for HRM and deigning only when we seemistakesin termsof failwe bainint to support careeradvancement.As or arribing blarne- asopposedto claiming an easily accessiblepartner h problem-sotv- r€sponsibility - that they ictually becomea n& management institutions can prcvide -_ part of whv and how we have failed. indispensableaid to acompany'sgrowth and And itis especially encouaging to note at the sametime, gain invaluable opportuni- ttiat managerstjodayarcnoticeablvmorehesihesto h vigoratetheir own leaming processes tanttoletg;of empioyeeswho aresomewhat with examplesand casestudieJbasedon lackhg in top-oFthe.line skills. As long asan experience.Through such partnerships,both employeeprove that heis hard-working and emptoyeesand studentscan dvail of an edu- productive, a maiority of employers today cation ihat is up to-date,relevantand athmed wor.rldprefrerto tnvestin baining the worker to changesin technology and businessprac- to meet the new skills rmuired of Nm than uce. rcsort to outright termination. As a profussorat tl€ AsianInstituieof N{anIt's easierto quantify productivity rm-tms ag€m€nl I shdreess€ntialydnesarnercsporEl- resulting from Sasic onllne training lthee bilitie as a trainer.We bdth l€lp o* Outgo hmes the cost spent on haining), thdn tio g)

measule r€tutns on continuing education through serninarsoreven full-timeMBAprograms. Teachingis ultimately an exercisein hope. Teadring or haining for meani n g f u l r e s uI t s tsanslatingwhathas been leamed to commihnent and then to action- cannot easily be measued. After your hour in the classroom or the workshop, you hope that the student will have come awaywithsomevaluable insight or some germ of an ideathatwill help him work better And it is generally safeto assumethat by providing employees necessaryskills, knowledgeand attitudes,managers create a solid knowledge foundation that can then be reinforced through still more training. Tra.inhg is still the besl vehicle for transferring knowledge and gmerally will proyrde pay-backsthroughout the manager's Protessronalcaree!,

TheEmCo:pe asa Sffigb Resorce Wfi today'sprcrniumonservice,manag€rs strouldpaymor€atFtion not only to satisfying cuslorn€rneeds,butto satisfyingand pmviding lonS-Em oppottunities b ho6e who rruttEr mctin te poduct-servicecustomerchain the unployee. llrey ate business'rnct imporbnt straE$c r€soime and slrould be seen as an inveshstrath€rthanasa ccttobeminimized or scrimoedql Peopiemanagemortshould be ascribeda sh"atsgkrolein oryanizatiorsandoEanizaoon$ $oda work bw"ardsdweloping a"newbrced of managerwho urderstandi Ee'variousskills requir€d-ofhim - flom firurKe b rmnufacturin8 h, HRM. The Elationshipbetwe€na company and its employees demands the involvernentof everymanag€r- not tustt6e in the persorneldepartn€nt. I-lR Dractiboners sipuld rnake it treir responsrbiliti,to take an activemle in-oubting aimpanies to cpmFte more sucaEsshrllvEssentially,employes are eager to do a good iob. If management allows, they will chooseto take greaterresponsibility for their work, contributing ideas that will ultimately provide a bettierwork envircnment and €rrhanc€d prlductivity. A challergedenployee who trink of hirnseliasaparh€rL *reb;siie$6 workbeter ard qeatesd moreorofitablecompany.But this end r€$nt canoriy be adrieved through enlighued HRM policbs and a rcnewedernphasism leaming. I THEASIANMA,{AGER. FEBfiUARY1S4

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FEATURE

ln the secondhalf of a twcpart series, Robert Daviesexploresthe winningcharacteristics of best practice firms.

BY ROBERTDAVIES ASSISTANT PROFESSOR OF STRATEGIC MANAGEMEI{T LONDONBUSINESS SCHOOL

Happen

he Innovation Stage:CreatingStrategicand Operational Breakthrcughs lmitative strateglesrarely producecompetitive advantage. \4/inninS requires creating shategles that chal-

lenge conventional assumptions.For example, bv simultaneouslydelivering *Lingsviewed by competitorsas firmshavebeenbrilliantat this.Thev altematives. Japanesâ&#x201A;Ź have steadilvbuilt their capabilitiesto deliver superior customervalue by doint things cheapet faster,smallet more reliably,more c(mvenientllimore flexiblv and with 'greater attentionto individualcustomernceds.while competitorsarestilltrying to figureout whetherto 80 for lower costor d ifferentiation.

StimulatingStrate$c lnnovation An increasing number of organizatiorrs have exposed their mana8ers to techniques such as brainstorming and iateraf thinking (Edward De Bono, kt./,?l lltinkirtgfor Mnn agctlltfit,197\), as a way of generating a more creative approach to strategv. Though these exercises can be both

interesting and fun, the results are often disappointing. There aresomeexceptions. Roleplayin8 exercisesin which managers view their industrythroughthe assumptions,capabilitiesand objectivesof current and potential competitorsandthendesign strategiesto attack their own position can producevaluable new insights. Exploring how successfulfirms from other industries might competein your industry,or usingbusinessmetaTHEASIANMANAGER. FEBRUARY 1994

phorsdrawn hom otherindtatries(e.g.,Toyotaexploring factorylikea supermartheimplicahonsoforganizingacar ket,or Virgin Atlantic exanining long-haul air travel asif it were a form of entertainment, or BancOne comparing a banl<branchto a McDonald'soutlet or a cataloBueshopping operation)canalsostimulatene\^,andcreativeideas abouthow to comDete. Anothertechniqueofvalueisthesystematic exploration of "coltrarian" strat!'gies. This involvesexploringthe implicationsof pursuingexactlytheoppositestrategyto that haditionallvfollowedby thefirrn or bvothermajorplayers in the industry. The power of this techniqueis its exploitation of the fact that t^,hileimitation rarelv works, going againstthe conventionalwisdom can xrmetimesyield a unique advantage.Interestingly,recentresearchon corporate rquvenationsuggeslsthat successful tumaNunds at firms iike Hotpoint, EdwardsHigh Vacuumand William C<x)kq,ere achievedin part by questioning the industry's conventionalwisdom and pursuingcontrarianstrategies (CharlesBaden-Fuller the and fohnStopford,Rejul)enating MnturcBust ess,1992).

StrateglcSuccess and CreativeTension

\ ihile all of the above techniquescanbeofvalue.theyalso sharecommondrawbacks.They all rely on specially organiz,ed "events" rather than on-Boing pr<xes.ses, and they arâ&#x201A;Ź t)?ically confined to the ranksof planners or managers.They do nothing to shmulatea creatiYeapproachto continuousimprcvementbv the

FEATURE

larger workforce. One answerlies in the power of "qeative tension"(Peter *r.ge, ThrFillh D iscipline, 1990, that some best practice firms have been able to engender within their total organization.Thesourceof this tensionderives from the challengecreatedby focusing the attention of the entire workforce on the gap betweenthe firm's sharedvision and thecurrentcompetitive rcalitv facins thefi rm. However, to be fully effecdve, thi broader corporate vision must be translad into a seriesof meaningful local visions or goals in order to pnDducea local competitive challenge on which individual workers and workgroups canfocw thea seative energies. lnqeasing cleativity and irmovation has thebenefit ofexpanding the rangeof shategic oppoftmities availableto the organization.lt alsoincreasesthe rangeof choice,This canbe a huge advantagg but it can also add to the problem of choice. For some managersand or8anizations this can be a serioussourceof

alsooftenpoorly implemend. hier€stingty, in many firms, theseobvious failures of the decision processwere ofben not discussed openly, though they weie the subjectof much idle de. bate in private. In our experiencea morc effective decision processis "collective re sponsibilitv." This ena much mor€ ordered hierarchy of strategic couragesbroad involvimert in decisionsand priorities rooted firrnly in ostomer needs. free and open debate; however, there rs a Thesepriorities had beendetermined bv de- clearly defined decisionmaker or decision tailedinquiry intowhat thecustomersv;lued rule (such asa maiority vote) tlut is 6nal and most highly and they were driven svsteman- binding. The agreementis that all views wilt cally eithei by the n&d to elim.inate a signifi- be seriousiy considered, but that those incantcompetitivedisadvantage, or to open a volved arehonor bound to abideby thecollecsustainable advantageover thecompetition. tive decision and to be held fidividually Thesepriorities, and thereasonsfor thetrade- responsiblefor implementing it. offs that lay behind them, were consistently reinforced by referenceto the firm's vision TheMaEgement of Dllemmas and mission and were widely understood The third common choiceofproblem was throughouttheorganization.lhough not ar- as.sociated with the handling of iiilemmas, or ticulaH in theseterms,thebestpracticefirms putanotherway,theresolutionof apparently had in effect built a 'stratreAiCstaircas€,to conflicting opposites (Charles H-ahpderiditriculry reachthe firm's vision,with iach steprepre- -fumer,CorwmteCuhrre, lgqo).This issueis sentrnga specificset of consistmtstrategic neatlyillustrad by a joke that is apparently Ih6 ChmscStaEe:Prlorities, Docislon initiatives(Hay and Williamson,lqql ) told fi Japanaboufthe way Westem"managStyl€sandDllemmas ershandled ilemmas.fhe;<it<eUegirswittr ttie _Choiceis fundamentalto strategyAmong TheMythot Consensus questionr"What doesa Westemmanagerdo other things, fir:rn-smust choose-where ro The problem with the choice process with a questionl" The punch line is: "He compete,which outomers to serve,what to stemmedftom thebeliefamongmost manag- answe$ it!" Unlike their Japanesecountersell, what to make and what to buv, which ers that achieving a consensuson the firmts parts,mostWestem managersdo not find this -increase suppliers and distribution channeli to use, strategy would commitment and particularlyhmny.What elsewoujd you do whatcapabilitiesand competitiveadvantages thereforealso greatly incrcasethe chancesof with a question?The lapanesefind it furmy to develop, which techn;logies to use and successful implementation. Iir theorv this becaur they believe tirat questionsod how to or8anize themselves.In our dealings might be true,but in practicewe often iound maska dilemrna and that it is foolish to lry to with managerswe identi fied threekey choiie i t to beotherwise.The 6rst problem stemmed answera dilemma.Youresotvedilemrnaiby problems:problemsof priority seftin-g;prob- from the fact that a fulJconsensuswas rarelv "being with them. ' This ptaces them in i Iems wrtn tne Drocessot rcached,particularly when a contextof creativetensionwith the prospect choice;and problems in mansignificantchangein strategy that may be resolvedin a wav that thev d;tvaging dilemmas. wasbeingcontemplad. Fre- ers the bestof both worlds. quently managers split into The managementjobis firll of dilemmas: PdodtySettlng rival factions. However, the d iffer€ntiation, quality or varieWversuslower ln many firms strateAic commitment to consensus cosb cenhalization versus decentralizanon; planning has become little meant that discussion was functional structur€versusproduct structure; more than an exercisefor gencontinued well pastthe point plarmng versusopporhmism; individual inierating lengthy wish lists. of usefulness,frequently de- hative versusteamwork; local discretion verl{hile eachindividual item taying strategicdecisionsthat sus central predictability; visionary an expanded product range. werc critical to the competi- leadership versus detailed management. broader market coveraie, hve successof the firm. Reso- Many of thesedilemmas arc actualiv more fasternew product developlution came either when the about mieansand processesthan about ends. ment,lowerco6ts,betterqualfirm wasovertakenby events, By forcing achoicebetweenthesealtemauves ity, shorter lead time, etc.- is or whm a powerful senior somefirms have found they have given up admirable in itself, taken tomanager (often the CEO) compehbveadvantagetio morc innovahve Fther they are guaranteedto stepped in and violated the competitiorswho were ableto reconcilethese paralyze the organization consensusrule bv imposing a appar€ntopposites.In ourexperiencethebest with strategic indigestion. decision.In viola'ting'theco"n- approachis to make very clear choic€sabout this paralysisimplies sensus,however,thedecision ends,butnot to forcepremafurechoicesabout Jjsualy ouslnessas usual. maler fiequendy alsolost the the detaitsof how thiv will be accomplished. ln marked contrast, manactive commitment of thos€ This allows for bottl greater creativity and agers in best practice firms who had beenovemrled. The treater fle\ibility andadaptabilirytt alsofo6wer€ t,?ically ableto point to late decision was therefore ters a level of involvement in the determina-

'Theonly truesource of competitive advantage willbean olganizdlon's ablli$to leam fasterthanib competitoF."

FEBRUARY 19gI . ]HE ASICNIVIANAGER

FEATURE

tion of the day-today details of strategy that helps pmmote coEunihnent.

"lncreasilg cteativityand innovation has the benefitof expanding the nngeof strate$c oppoltunitles avallable to an orgFnlzation."

was the loss of contol and uncertainty associated with delegating responsibility for TheCommitStage:Movingfiom key performanceobjectivesto Comdlanceto Commitment the discretion of the Many managersstill do not seeemployee workforce.Theyreportedthat commitment as a critical assetor caDabilitv at times it was hard not to see worth significant investrnent.They view th! this asabdicating their manaco6tsin time and effort asreal,but thebenefits gerial responsibility and as intangible and uncertain. We have seena equally hard to resist the number of strategiesfail, however, simply temptation to constantly inbecausemanagersdid notspend enoughtime terfere.To be successfulthey working to generatetheconunitment of those found that they had to redeemployeeswhose day-today actionswould fine their role from that of an determine how effectively the shatety was evaluator, detailed decision formulated. While most rnanatenclearly rcc- maker and controller, to the ognize the value of open communication role of guardian of the vision, about the firm's shateg}/and objectives,often coacb facilitator,orchestrator this is confined to d telthg or informing em- and rcmover of obstacles. ployees of ttle implicatiorrs of a vision or Many of the managerswe sttatjegydevelopedelsewhere.In termsof the spoke to reported that this approachesillustrated in the figure on the type of behavior often felt previous page, the rcsult is action based on unnatural and counter-intuicompliancerather than commitment tive. lt required a leap of faith and a strong Complianceis not a very satisfactiorybasis personal vision, basedas much on "gut feelfor the kind of continuous imorovement that ing" ason conventional logic. Often the final is increasinglyrequired if firms are to sustain "conve6ion" to involvement and emDoweran advantage.Commitment is not howevet ment had come out of crisis.The old wavs of something that canbe easily "engineeredin" doing things wercjurtnot working and rirore at the end of a shategy forrnulation process. ot the samewasseenasa sue path to disaster Thefoundationsmustbe carefully laid at each stageof the StrategicAction Process.For ex- TheRlsb of Enporyednent ample,employeesaremorecommifted if they An increasingnumber of marugers,espesharethe organization s vision, purposeand cially in firnu ex-posedto intemati'onalcomval ues,which theyaremorelikely to do if they petifron, have realized the importance of have shared in the processof creating them. achieving a higher level of understanding Employeesare also more comrnitted of they ownership and initiative from employees if arc able to monitor and correct their own they alc to competeeffectively.However,a performance,if they understandthecompeti- number of thesemanagershavehad negative tive realities facing the fim and how these experiencesin their attempts to generateemr€alities arc [kely to chante in the future. powerment and commitment. Workers reThey will alsobe more committed if they are maineduncq)perative,orlackedtheinitiative encowaged to use their own creativity a.nd or the abfity io respond appropriately and initiative and if thev have some sav over the results were disappointing. Mor€ detailed struchues and systems under dhich ttrey discussions with these managers often rework and the way their worl is organized. vealed that their decision to incourage involvement or empowermenthad beendrivm Ihe Challengies of Commitmentin morc by logic than by a furdamental belief in Best PractlceFlms the righhess of the approach. lt was not In terms of behavior illustrated in the backedby any leap of faith or shong personaI figure above,managersin bestpracticefirms \ ision. The problem was that as evidence werc much more achvein moving beyond beganto accumulatethat the approachmight simply communicating towards the more ac- not be workint as well or asquicklv as tlrey tive pusuit of employee involvement, dis- had hoped, iirey began to havd second covery anq ncreastrgly empowennent at thoughtsandthey stopped"walking thetalk." every stage of the StrategicAction Process. As their own commitment to involvement This behavior was not without its challenses. and empowerment beganto ercde,sod id that The managerswe spoke to were very aware of theworker" who$ebehaviorwascribcarro thet own behavior had to be fully consistent success. with the firm's espousedvaluesand that they It is tempting to ass€rtdtat had the maiaghad to be willing to be calledto accountif they ers not wavered in their own commitment to fell short. the pr€ess then it might have succeeded,but With communication morc of a two-way it is impossibleto know. What is certainis that process,managerswercalborequiredto listen tenerating empowermentandacorrunihnent and adapt,ratherthan simply advocateand is always a slow and difficult pnxess. Often inform. One particular managerialchallenge things Start to look worse beiore they look THEASIANMANAGER. FEBRUARY 1994

better - people are cynical, lack the skills or suffer frcm "leamed helDlessness." Overcoming the'se obstacles requires patience and perseverance.Based on our experience,our advicewould betllat while lone-term strategic successis eno-rmous,managers should nevertheless careftdly examine their own commitment to the ioumev beforesettingout. Going halfwav down the path and tuming back can leave the organization in a worse competitive position than not setting out at alt. Failed commitment, in other words, can make complia.nceharder. In orqanizitions where behaviorls based largely on compliance,the design of the organization's structures and reward systems is a critical determinant of how effuctively shategy is implemented. ln effect, designdetermhescompliance.ln organizations basedon commitment, by contrast, the reverse may be true. In best practice firms the goal oi design shifts from control to accommodation and support for the firm's vision. That is why in the Stratetic Action Processthe "Design" stageis placed after the "Commit" stage.

t*"'Bahnci'uFltand IFr,m,i* The successful implementation of any strategyrcquircstlut theintemal or organizational architectweof drcbusinessis consistent and supportive. Thercarea number of checklisb or frameworks designedto help managersfocuson this issue.Oneof themostfamiliar is the McKinsey "Seven 'S' Framework" which focuses atbention on the match be. twef,j].Strutew and the organization's capabilities or S* ls, as well ason the supporting role of organizationalStructure,the measure. ment,iewardandinform anonSFtems,Sharcd Valles or culture, management and leadership Sryleand finally the attihrdes and capabilities of the people or Stqf within the o€anization. Shategicsuccessis supposedly basedupon the organiz-ation'sability to ensule "fit" ainong theseseven"56" (Iom Pete$ and Robert Waternran,In Surch of Excelletce 1982;Richard Pascale, Managtngon theEdge, 199{). Among our sample of managers there were many examplesof strategicfailue associated with poor fit. One common problem was the existenceof rcward systemsthat mcouragedbehavior (e.g.,salesmaximization) that was inconsistentwith the Dlarmedstrategy (e.g.,focusing saleseffort on high profit custome$). AIso common was the exisence

FEATURE

of a hierarchical, functional organizanon structurc alongsidea sUategythat called for rapid new product development and design flexibiliw. We also discoverednumerous examplesof strategiesrequiring individual and otganizational capabilities that the fim just did not poEsessand of technical and operationally driven culhles that were totally inconsistent with espoused strategies of customerr€sDonsiveness. Equally important, however, our discussions of stratesic failure also revealed that while "fit" mat be a necessarycondition for shategic success,it is not a sufficient condition. Particularly revealing were our dirussions with manaters from successful organizations that had suffered significant rcversalsof sEategrcforhne. lt appearedthat thebenefib of 6t betw eenstrutew,skills,structure,sharedoalues,stvleand sfarfcouldrapidly hlm into the liability of ilertia when theexternal competitive environment of the firm changed.Fit,in otherwords,wasalsoassociated with a reluctdnceto changea winning formula, at leastuntil theemerginceof a cnsrs forcedthe organizationinto a critical reassessment. Managers werc, therefore,faced with another dilemrna. The objective, obviously, is to some.how balanc€fit wift f:lexibiliry Discussionswith manaters hom companiesthat had achieved successin adapting to rapidly changingcompetitive environments (including computeN, electronicsand automobiles)revealeda clue as to how this dilemma could be reconciled. In each case the best practice firms had adopted flexible product and ostomer focused organizational structures rather than more traditional functional structures.Thev werc also active in promoting task-oriented product and customer tieamswith clearly articulated goalsand purposeand specificperfomranci targets.Theseteam goals were, in tum, clearly linkedto theoverallcompary vision in order to ensurec<prdination and consistency.Finally they had developed intemal structuGs and systems that exposed a broad range of p€ople in the firm's value creationand realization processesranging broadly from R&D design, purchasing and production to logistics, marketing, sales and service to dircct contact with customers . Contact was followed by extensiveexchange and networking of information about customers;including: relativeproduct or service pedormance,fu ture performance and functionality; the impact of changing technology; competitor offurings;and

"Many manageni still donotsee employee commltment asa cdtical assetor capability wolth significant investment."

the needs of the customer's customer.Careful listening to customersfor lesstangiblebut no lessimportant to "gut feelings" about things was also encouraged. One of our favorite exercisesbeforediscussingorganizational design is to ask malagels to draw the structure of their organization working back from the custorner rather than down fron the chief executive. In best practicefirms this hasusually been reasonably straightforward-the structureflows. In many firms, however, the structure rapidly fragments. Dscontinuities acrossdepartments,f unctions,hierarchical levelsand geographicallocations reflectthe dictatesofhistory and the firm's own administrative conveniencerather than that of custorncni. Thereis a biasfor control rather than a biasfor action.

TheActlonStage The ultimate test of any strategy sefting process is whether it prcduces action that leads to competitive advantage.ln a rapidly chan8ln8marletplacethis requireserperimentation, flexibilitv and the ability to adapt. Many previously successful organizations that we encounteredhad failed becausethev had losttheirbiasioraction.Theyhaddeveioped organizational "slack" ald becomere. sistors to change rather than creatorsof change.However, changecould only be resisted for so long. Eventually, there was a crisis, precipitated by significant financial lossesas well as the loss of market shareand the erosion of both investor and employee .confidence. Frequently, these "reactive" crises involved change on other people'stierms.The organization was forced to make significant changesin strategicdirectiory accompanied bv drastic ccnt cutting, major redundancies,de-laye ng and r€struchring, all of which had the effect of leaving the organization confused and demoralized.

"A keyelement in howwell weleamis thewaywe communicde withone anotheL"

TheCharactedsticsof Best PracticeFims Weobs€rvedthreeimportant and interrelated characteristicsof bestpracticefirms that helped them maintain their biasfor action.First tlrc

existenceof a shared,performance-related vision helpedtheorganizationchannel its collective energiestowards achieving and sustainingfu hre competitive advantage - the organization was focusedon the challenges of tomonow rather than on the accomplishments of today.The vision was also used to provide a stimulus to conunuous rmProvement throughout the oryanization. It had beendesigned,in other words, to be actionable. Second,recognizingthat a senr of crisiscanbea powerful motivatot the managers in best prachce firms used "proactive crises" asa means of challenging task-focused teamsand workgroups to accomplish objectivesthat might on the surface have appear€dimpossible.These"crises" (or "dangerous opportunities" to use the Japaneseterm for crisis)were designedto be fully consistentwith the overall vision of the organization, but also to challenge it to step "outside the box" of conventionalthinlqng to achiere bredkthroughsin performance.These breakthroughs included halving defect rates or the length of the prcduct development cycle, adding featureswhile significantly rcducin8 costsand reducing product or service delivery lead.times from months to weeks, claysor evennours. Someclassicexamplesof the achievement of "impossible"goaliinclude:Motorola'sre, duction of order turnaround time on twoway radios hom 3) days to three and its reduction of the development time for its cellular phones from three vears to lessthan 12 months; lntel halving the time between chip generationsto lessthan h,voyears;Canon's origmal development of the personal copier for under $1,000and Toyota's reduction of the time to exchangedieson its stamP ing lines over a six-month targetpedod ftom threehours to lessthan ten minutes and subscquently to less than a minute. In each of these case; managen werc able to generate the energyusually associatedwith extiemally imposedcrisesand focusit on the systematic accomplishmentof their organizational mission5.Tmportdntly,unlike many real crist's, these "proactive crises" were not tr€ated as one-offevents after which the orsanization could breathe a collective sish of r€lief and thenrclax.Theybecamepart and parcelof the organization'sculhlre and valuesof constant improvement, aswell asan enduring symbol of what was possible. These"pioactive crises"servedto r€inforcea third important capabilitv -This we observed in thebestprachcefirms. wastheir abitity FEBRUARY 1994 o THEASIANI4ANAGER

FEATURE

to adapt their pr0Cucts, thei services and themselves very rapidly as market neds changed.Realizing the virtual impoesibility of always getting it exactlyright the first time, they sought instead tiorefine their capability to develop, iaunch and adapt products and servicein a very short cycle - a prcc€ssthat has been aptly called expeditionary marketing (Flameland Prahalad,7991). To cibe an example, between 1986 and 191, Toshiba inhoduced over 30 diffetent models of lap-top computers into the Ug coverhg virhrally every market segmentand giving it theleadingsharewith apgoximately 2ffl" of the $7.5billion lap-top market. Meanwhile, IBM did extensivernarketrcsearchand produced numerous protot'?es, but fotlowing the disappointing rcception of its 1986 portable did not achrally launch a laptop until 191, by which time its sharc of the US market had fallen to lessthan two per cent. The important feature of the best-practice firms, by contrast, was that thev did not let themselves get bogged down'in excesive market research,but were out in lhe market, trying it tiestingit and improving it in real ume. To summarizg the bestpracticefirms appeared bo have developed a capability for "just-in-time strategy." These just-in-time shategiesdispensedwith large investrnmts of time and money in the creationof detailed master plans designed to anticipate every eventuality. Thev invested instead in articulatinga vision;d in developingtheorganizationt ability to run and leam from strategic exDerunents. -This involved redirecting rcsources tiowards hoadening the o4ganization'sreservoir of skills and capabilitiesand developing its ability to do quick studies.It alsoinvolved encouragingthe development of intuition as an adjuirct to analysis and enhancing the o€anization's sophistication in cutting its losseswhere feedback showed ther€ to be lirnited promise (Karl Weick, The Competitive Edge, in David Teece,&. Substitutes lor Slrotegy,198n. The best practice organization's invested,in other words, in their ability boleam from their current actionsand adiust quickly. Wthin the context of the Strategic Action Process,th.isleaming is not tlead as a separatestage,but asa centraland continuous theme.

Continuous leamingl It hasbeensuggestedthat in the future the only true source of competitive advantage will be an organization'sability to leam faster than i tscompetitors (Arie De Ceus. Plaruring asLe run& Har.nd Business Reuiau,MarchApril 1988).Consistent with this principle, much has b€en written rec€ntly about the "leamingo€anization." It is important not to loosesightof thefactthat ul tima tely organizations achievethis stahE only if they arc comTHEASIANMAMGER . FEBRUARY 1994

posedof leaming individuals. ln practice, leaming is often pain-ful, particularly when it involves unleaming something we think we already know. Our experimce in consulting as wel as ftom observing our own behaviot is thatther€isanatural tendency to "shift thebuden" of adiustment away from oursilves and on to others, irrcluding "the orqanization." Thereis a realdanger that our collective preoccupation with leaming "organizations" may actually servetjodivert attjentionaway from ourselvesand our own personalneed to leam or unream.

ulnbest pacdcefimrs, thegoalof deslgnshlfts ftomcontd to acoomoddotl andsupportfor thefirm's vlslon."

for€ a key determinant of the individual and the organization's ability to change a paradigm. They are willing to challenge and set aside their own intemal conversations. All of the f ailureswe idmtified under the different stagesof the StrategicAction Ptocess were comDounded by the failurc to leam. Strate. gic mistakes need not be competitively fatal if we can leamfrom them ouicklv. Witness the strategii suciess of Honda in the US motorcycle market, wher€ it rapidly adiusd to the failue of its initial shategy of selling large bikes in dircct competition TheRoleof with US manufacturers and Communlcatlon imoorts in favor of the small A key elementin how well we leam is the bikes that customers actually wand. Unway we communicate with one another. In like many of its competitors, Honda was most o.ganization's we have dealt with, in- willing and able to step outside of its own cluding our own, communicationhasmorero pr€conceptions and change its decision in dowitliadvocacy (C.Argyris, SEatqy, Change the light of what the market wanted. Most of and DefenshxRoutines,1985).The common the failures that we encormteEd could be definition of an effective communicator is haced in somedegr€eto firmsand managers someonewho is able to advocatehis or her acting unwittingly within their own interviews eloquently and forrefullv - pa*icunally cr€ated "virtual" r€ality. None of us is larly if they agre6with our owri. imrnune from this traD.What is essentialis to At best, howevef, advocacy is only an realize that our own behavior and our own indirect lever on orsanizational action, Ad- listening and leaming capabilities ar€ our vocacy is only suc&ssful in prcducing ac- moot powerful point of leverage in the systion through the listening of others. lf they tem, and to work on those first. disputewhatwe ar€advocatinqthenwerisk having a "d ialogue of the deaf.;For action to Summary: ThoPathto Comp€tfthre follow from this deadlock, some form of Alva.rtaSo power is usually required to unblock things. To a significant degr€e all organizations Reliarce purely on power and position to create their own competitive rcality. The accomplish obiectives, however, is a risky purpose of th€ StrategicAction Processis to strategy in the long run. It may prcduce provide a framework that encourage manaction, but it is likelv to be comDliant action agersto determine that reality by conscious rather than fully coinmitted aciion. choice rather than reactively. lnstead of fo, Organizations that are full of pure advo. cusing on how the organization canadapt to catesare unlikely to be true in learning or- its environmentit focuseson an exDerimenganizations. This is true, ironically, even tal apprcach to shatety designed to change when they are made uo of vehement advo- the mvironment. The different stagesof the catesof the leamingorganization.traming Processtakesmanagersthrough an iterat ve ortanizations are peopled by listeners, not leaming cycle for moving vision into action. purc advocates. Listeners arc open to the On the first iteration managerscan use tlle altemativeviewsof tlle world exlressedby successivestagesof evaluate,inquirc, deate, colleaguesfrom different functioirs, by em- choo6€,dmmit and design as part of the ployees at all levels of the organization and pro(tss of formulating a relevantand actionespeciallybycustomers.They arc willing to ablesharedvisior. On a seconditeration thev balanceind'modify their own advocaryrn canbegin the proces of building thestrategic the lightofnew and altemativepossibilities 'bridge' toaccessthevision. Subsequentiteraaboui the needsof the marketoiace and the tions can then be us€d to monitjo{,refine and skills, values and behavior th;t will be rc- con€ct the shategy. quiredto exploitthem.TheyencouragecreaOverall, we have found this appoach to tive "what if...l" ratherthan restrictive"ves be an excellmt vehiclefor deploying stsategy but..." conversations.They believethat ihe throughout theorganizatior sothateveryday ability to listen for new and altemative pos- operations become mor€ strategic.Without sibilities is the essenceof leaming and there- this no strategycaneve. really succeed. I

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FEATURE

Itbrn "What is it that the Asian experience adds to managementtheory that was not already In the western experience? "

Enterprise

BY LEOI{ARDO R. SIIOS PROFESSOR ASIA IflSTITUIEoF MAI{AGEMEI{T

estern tradition has historically beenwont to conkast itself against the "C)riental". It is not just that vague feeling of superiority common to human associationswhich causesusto corLsideroutsidersless f fortunateandtherefor€inferior As the ancientCreeks,so the modem Westhasperceivedour differences to lie in something quite specific: its "rationaliry" Ther€in, it is believed, lies the differencebetween Eastand West.W€stemculture is notiust any culture but insofarasit based on rationality, is universal culture. As an Americar author put it "Cultural rclativism succeedsin destroyint the West's1miversal or intellectually imperialisticclaims,leaving it to be tust another culturc (Bloom, p. 39)." l-ately,however,therehasbeen talk about "Asian" management as distinct from "Westem" management. What is it that theAsian experienceadds to managernent theory that was not already in the Westem experience? Must managementbe either Asian or Western? What happens then to THEASIANMANAGER. FEBRUARY 1994

universal managementprinciples? Somelight may be shed on this debateby examining the shategizing process.Takethe "vision." It has become the norm to besin

strategy formulations of the firm with the corporatevision. Its usefulnesscanbegauged by its wide use.The furction of "visioning" is to spellout where the companywants to bein the fuh|'e. The clearcr the vision. the clearerthe mission.Theclearer the mission,the easierto setmeasurable objectives. So focused,the company can prioritize and optimize the, economicsof finite effort and limited resowces.

ThoPlouem of Ratlmallty There is, however, an inherent problem in this conceptof vision, It emerged rather unexpectedly durine an informal breaKast dialoguJbetween a distinguished ' American orofessorand author of manymarugementbooks,Warren Eennis, and some guests of th€ Asian Institute of Management. The occasion was the Institute's 25th Anniversary Celebration in Manila in February 1993.Bernis sooke about leadership and said arnongother things thit Cueleaders had vision. During the open forum one of the participants rather casually made the remark that Hider, too,had a vision. There

FEATURE

was no appropnate rcsponse given tio the implied criticism of thevirtues of " visioning." It was a rude rerninder that "vision" isln abshaction. As such it tells us no0rins of its cont€nt. In shategy formulation, visi"onabshactly names the beginning (which is also the intended "end" ) in the orocess of strategizint. Sirnilarly in the leadir, it names formaly that which guides $e erercise of leadership.In both cases,the term "vision ' is a puely format concept. Stahgizing "into " and bidership canbeconceptualized a uruvetsal" raional processapplicableto any and ev€ry sihration, but only if it rcmains on a purely formal and abstractlevel. A Hitler (or a Toio,for that mafter) and a Mother Theresamight conceivablyleamand apply conectly the-same formal processot visimnr8. TtEy might wen leam'about t€ seabdc rclevanceof Midael Porter'sconcept of "va[e drain" Nevertheless, trcsestuderrbof a "tmiveEally" applicable ratiorul pr(rtrs wouldsrd up-if we mavbeallowedarimdershErstt__doing differint rhings ln someale's happy phnseol%y, ttt€y might aI do uhe ftrng right but not rncssarily Erenght dfng. The purely formal, "turiversal' rational proc€ssof managemert is essentiallyhcomplete and problematical. Strategy is the efficient and effective use of means to achieve chosenends. As a pu.rely formal processit appliestoany conceivablei'mearu"or "ends." It rationalize the activities of the firm so that it may do things efficiently,so that it may do things right. But as such it does not say whether it is doing the right thinq. Hereis whercAsian arid Westeinmanaeement can to their separate ways, evin prcscindingentircly from ethicalissues.Since managenmt is a mo6t practical affair, it will take placein a concretecontextand sihration. The "forrnal" processisfleshedout with "conclete" rieanings and valuesand the common tool can Esult in distinct productions. Becauselhey can differ about-what is the right thing, Q"dity in management is thus not merely "doing the thint right the fust time," for this refersto efficimcla It is alsodoing the right Oring.

WostgmandAslanManagement L€t us illustrate. Firm (A) hascertaingoals toachieve.Itmaythendecidequiteratio;a[y ftat in the case of its workeis it wtl only reward their "performance", thai is, thosa activities that prcmote the firm's goals.Consequenoy,it wil try to be "lean and mean" by continuously ridding ibelf of "faf', that is, Having chosen a goal, the most rational apprcach is to choosethe most effici€nt means to achieve the eoal. That is called toal or instrumental ratio;afiry It follows that such traig as "seiioriw", shou-ldnotbe rewarded assuch. Forsenioritv is not performance.It does not contribute to the attairunent of the firm's goal. It would 42

therefotebeirrational, in this way of thinkin& to promote people on the basis of sen-

ioriry

"A sigyrofthis tumto the tradltlmalis the cunent v€ue d dlstingulshlng the leaderfiorr the manqger, 6 JohnKotter does."

Clearly,fim (A) will diffur in many essentialways from firm (B) which happensto rcward seniority,not accidentally but systiematically. It in addition, firm (B) believesin "life-time employment" then we have an even wider "cultual" gap between firms (A) and (Bl. As far as firm (A) is concemed, firm (B) acts "irrationally ". On the assumption that rational mana8ement is efficient managementand thercfore shotrld be more successfirl than irrational management,then thesucceiis of firm (B) would appear asa puzzle to firm {A). This may bewhf the Westseemsto beso farinated by Japanesemanagement. Now theauihor of Knizrl;akes liftle of these"irrational" practice of lapanesefirms and prefersto focuson techniques.Out,these Japanesetechniqueshaveastheir fourdation certain common and sharedvalues, such as reciprocalloyalty between company and worLers.Theymjy appear transferable, since astechniquesthey aredescribedin behavioral terms. But asM. Imai himself says,knlzenis"a way of life." As techniqueit is but an expr€ssion of a way of life. Itssoul is culturp. Fromaformalpointofview,bothfirms(A) and (B) are rational. Both are consistenrrn their understanding of organtation. They are bothpurposive, using meansas they undentand their chosen ends. The issue between EastdndWestin managementtheory is not about formal rationalitv Ii is about values usedto fleshout their rationalities.Thevdiffer systematically,as two different syst6ms of organization, be(ause they ranl organizational values diffurmtly. ln the end, goalrationalityisdeterminedby value-rationiliry Thereis then a real sensein which we can speakofAsian and Westemmanagement,or morc acc-urately, oI Asian and modem Westem manatement. The rclevanceof corporate culhue for undeEtanding the dynarnics of the firm is a rclativelyniw "didcovery" in managementtheory It is, in our opinio4 the contribution of the traditional to the modem otganization.

Burcaucracy andClan There is a clear parallel intended in the differencebetweenWestemand Asian managementwe've dicussed with Max Weber's contastbetween thebureaucratic and traditionalideal-typesandalsowithhisdistinction behveengoal-rationality and value.rationality. To Weber,value-rationality is in the final

analysis irational ard only goal-rationality is called rational. The shifts that are occurdng in Westem management theory and practice may be described as attempts of the modem organization(thebur€aucracy) to reclaimwhat it had previouslyt€jecd, thekaditional organization (the clan) (see Sitos, 191). The literatute generally sp€aking continuesto usethe samedebunking "language" vis-vis the haditional, although now what is being debunked as traditional is the bueaucracy. Norbert Alter describes the Euopean development tiowards a new model of organization asa debureaucrausm, detaylorism and defordism, all ttrese"isnu" beng usednbchangeably. Alb wiEs about the "new proftssiorals"who are creating the new organization.Ro6abethMo6sKanter annomces theemergenceof the "innovative" h contrast to the "segmentalist" organizations "the old bueaucratic chanqe-reisters," Still, we observethatmote rccentdeveloDmmts, while indicatng an attempt to ov;come the negahve consequencesof the bu-r€aucracy,suggestthat theseorganizations cannot seemto escapethe srip of that which is mainly responsibli for the"uriwantedconsequencd, nairely, goalor instsumental,some. times also<alled functional, or more recendy strategic,rationality.Thus,theycontinueto be bureaucratic in the fundamental sensedlat Webermeant it. This rational and abstractconceDtof the organization isstill at work in the new oqganization: for theorganization remairs a "thing" with its own goal.The resultis ttrat everyddng in the organization - including ie membenl becomesa merc instrument for achieving its goal. That is the Weberian "special sense," thatmakesabureaucracvabureiucracvFrom it follows all the charaiteristics of ttr6 "fullv developed" bureaucracy,includ inq a certain "dehumanization" which, Webei says, is "welcome" to capitalism. What this rationality demandsis the "professional' whom Wetier rather unambiguo u s l y d e s c r i b e sa s t h e " h u m a r i l y uninvolved," and ttrerefore strictly "objechve" profussional.That is theidealbueaucrat: impersonal,objective,calculating stsicdyde. termined by the goals of the organization,

Weber's Cdtlque of the Tradltlonal TheshortcorningofWebet,sreadingofthe kaditional - why"he was unable to g[ve it a more positive int6rprctation - was a-rationalist bias which retiuced the traditional to a

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FEATURE

residualconcept.As heexplainshis "interprelive" (rxrstehmfu) sociological method, the adequacyof the meaning of a socialaction is proportionate to its goal-rationality. Since there ale social actions that arc not goal-rational, thesemust be explained asmere "de. viations" from reconstitutedrational acnons: what they would have been, had they bem goal-rational. For another,the traditional is understood by Weberin tr,vosenses,formally and materially Formally,it is defined asbeliefin tradition simply becaus€it is tradition. Materially, it is idmtified with the kiruhip svstjemwhich is determined by personal reljtionships. FormalJy defined,-tradition is, by deiinition, closed and static and this is often a critique levelledaSainstit. However, the "kinship system" cannotbe said to be essenhallystatic. For the kinship system can be quite dynamic and open, for instance by "exbension,"something Weber did not think important in an assesJmentof the haditional, probably becausehe was intent on contrasting modem Westemcultur€ ove! againstit. The kinship systemby extension becomespotentiallv universalist when not rcstrictedto blood retatiorships and open to "outsiders." Secondly,it can become democraticasparticipative practicesin fapanese firms demonstrate. Unive6alism and democracy - two supposedlymodern (and Westem)characteristics- arcnot incompatible with the kinship system,asis sometimes suPPo6eo. BecauseWeber understood the kinship systemas a deviation from the bureauqacy, he failed to apprcciateits positive organizational qualities.The kinship slstem is not an irrational deviation flpm the bur€aucracybut standson its own right with its own rationalitla lncontrast to thebur€aucraticabshacnon, the concietekiruhip group is not a meansbut an end: it doesnot exist to work but works to exist. It is this unde$tanding of the organization that d istinguishesthe farnily "system" from the bueaucracy. Inshumental rationality when tumed into a philosophy is usually called "positivism," "behaviorism," "scientism," among other names.Here, we have already mel one problem itseates asa philoGophy:it rclativizesall values. It is, as Weberwould say,value.ftee. Or as others would say, it is about "facts," about"what is" and not about "what ought to be." Herbert Sirnon drew the conclusio4 on the authority of "logical positivists", that thereforevaluesandethicalprcpositionswer€ beyond thepuwiew of scimce,for "there isno way in which thecorrechresso{ethicalpropositions canbe empirically or rationally tested (Simoo p. 46)." Since Simon was writing about the "science" of administration, it followed that values were bevond its purview. Howwer, Weber'sown description of the 4

'Stntegt b the efficient andefhctive useof means to achieve chosen ends."

method of rrrsleftendesociology implies that it iscounterfactual.It do€snotalways explain "real" activity of "real" pe<ple but only how pecplewould actif tlreywere entircly goal-rational;(if trey werEnotrcalp€ople?).So,itis ibelfnot alwals about"what is" but aboutwhat 'ought to be',nanrelygoal-rationil,not asvalrc-freeasbelieved,nor puely descriptive but also prcsaiptive. Positivistphilosophywith ib rationality,is ibelf undeigoint critique and "rcconstuction" But a boadening of ratidElity inevitablyFestablistresa link with thetraditional d1atwas severedby instrumqtal mtiqulity ln this linl(age,it is the b-aditionaldut may tum out trobe dynarruc, rational and universalistand the irsbumental ratic'nalitylhat daimed a mqropolv on reas<rn and universalit', inational and etrncrenmc.

Besidesbeing constituted by the " nouveou)l professionnels,"it is also describedas the refolr de I'artisanat, (return of artisanship) presumably as in artisans who think not in termsofbricklaying or walls but of cathedrals. But an even more dircct refer€nceto the traditional is contained in Fol fheCommonGnd by H.E. DalyH.E.andJ.B.Cobblr They hopefor "a new g'pe of economydifferent ftom eithercapitalismor socialism asthey have beenunderstood in the past...But for those who still find it difficult to thinl of an economy that does not fit on this spectrum, we suggest that they consider feudalism." (Daly and Cobb.p. 15,fn. 6). The authors expresslyderiy that ther lntention is "to call for a retum to feudalism." But they do believe "that surveying a wider Redafnig tlr Tradtond rangeot econorrucsystiemscanopen our eyes This leads to another observation. A to new poG6ibilities.Of these, feudalism is unilinear development frcm kinshiD tjomod- worthy of carcful consideration." ern bureaucratii organization is ihe usual What is relevantis the reasonwhy they assumption.But ifthe kinship svstemcanand think feudalism deservesa secondlool. "The feudal has m6demized, this assumption is as quessystem was more tionable as the rationalitv thet insDir€sit-.On communitarian than either socialismor capithe micro level of the ."-itemrise,ihis should talism in both theorv and Dractice.lt hasbeen not be difficult to comprehend.The;apanese badJy matigned since the Enlightenmmt by enterpriseusually canbe describedasa mod- thosewhose intierestreouired the extiroation em traditional organization. of the continuing powir of community in the rheru on page 41 zufr;esrshow an human life." organizationcanbe moderr ard traditionalat In conclusion one may say that clearly a thesametime:a haditionalspiritusing modem shift is taking place,not only in business bctmiques.It can also serve to explain how managementbut in other spheresof theory management techniques may appear the andpracticeand shift seemsto revolvearound same and yet be differcnt, according to a whai we havecalledthe problemsof rationaldictum of Fuiisawa, cofourder of Honda ity and values.In mote micro-organizational MotorCorporation:"Japanese and American terms, it seemsto rsvolve around the probmanagementis 95o. the same,and differs in lemsof thebureaucracv and theclan. I all important r€spects(quoted in Adler et At.)." A sign of this tum to the haditional is the Adler N.,Doktor R.S.,Reddjng C., "From rhe Atla.ti( to rh€ current vogue of disdnguishingthe leader Pa.ifi.Cdtu.y Cr6{ultural Manatemsr Revie{€d," 1986Yea ! Raier ol MooSentut ol ttt lomat of Mataia..nt, from the manager,as lohn Kottir does. But Alter N,,"lmovarion er organistion: deux tetinmih en.on Kotter's concept of a manager fits Weber's idea of a bureaucrat.It is not surprising that ornce," Rar.tdr.d'*de srrb/d8ia avriljuin 1993,xxxiv-2, I71 Kotter find sit necessa Blmm, inan, Tl'. Ct6i,S d th. A'netu Mint1. NN \otl: ry to supptement ii w ith the idea of a leader.Kotter's solution is a Simonand S.hust€r,1987 D.ly H.E.andCobbJ B.Jr.,Fd rheCommonCdl] R€di.ering provisional solution at best.It hasa parallel in the Ecmomr towa.d Community, Tle Envno.n€.i, and a Sus the "human relationsmovement," which de- hinable Futur€. &Bt6: Bea.on Pt6, 191t9. lm.i U., Kai.r^: Th? rey n ltpar r Co,rydtrnp Sr..As. N4 pends on the pe$onal efforts of the manager Yort, M(Craw Hill, Inc.,1991 Kant€r R.M., 1985,Tr. Cft,xA€M4sta Londd: Unwin Hyman at human relationswhile leaving the s).stem as impersonal as ever. ln short, although Ltd,1985. Kor|er I. A Forckt Ch4n8.:Hn| rad$hip Dife6lrcm Mn,,8e Kofter expresslvdecriesinstrumental ration- nnt. New York The Fe Pls, 1990 Sil6 L.R.,1992a,"teadeF and MatuB€E: An Updare," I,. ality, he fifu to'r..cognizeits slstemic dimenAsian Mdndy, (Manik) Ja^-Mat.,192 sions (s€eSilos 192a and 192b). SilcL.R,,199l, (])r*6:Th€Two Fae of Organizarim.Manila: Again Alier's description of the new or- The Asia. tnstitute d Matu8emdt, 191 Simon H.4., Adn'nisttotd Aeh."iof. 3rd ed., Na Yort: The ganization also suggestsa kaditional tum.

. FEBRUARY IHEASIANMANAGER 1994

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FEATURE

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the astqdshing grrowthrates- both current and proiecd - forAsia over thenext decade.It is hardly sulprising thm, thatdiect markebs the world over arelooking carefully at bting the Asian market beforecomrnitting thernselvesto a full rollout or even an office wi0rin the region. Unfortunately, not many of ihem have succesft ly and profitably - enteredthe marketplac€.This is despitea whole body of widence that pravesAsianrEspondmb not only g€nerateabetterr€6ponseratetlan treir NorthAnrericanorEutopeancounterparts,but alsooffer fte inte igent rnarketer far higher average order values than they arc accustomedto Gceivint in their home markets. The poblem appearsto be twqfold. First thete ate the selFinflicted iniudes. By this, I mean succ€ssftdNortr American package that have beenmailed into Asia widrout the remotest attention being paid to the logistics of dealing with an overseasmarka. Consider these three examPres. . Using the "$" sitn rather than stating "US$" through out the package. Hong Kon& Singaporc, Malaysia and Taiwanall have their ov,'nlocal versionsof "$," all of which

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are worth substantially less than the US$. lt is hardly .suprising that when a North American direct marketer mails into Hong Kon& the Hong Kong r€spondentslDuld sendhim a dcque in HK$ (curcndy worth US$0.12c€nts) which the NorthAmericanmarkeberisneitts inaposition hoencashor us€to cover his cosb.And all becauselie forgot to lrse the initials "US" beforc the "$" sign. . when reply envelop€sare included with direct mail packages,they tend !o be the sameonesused in the continental United Stabesor the dlect mailer's home counky. TheyhaveUSorforeignpostalr€ptymarkingsandmayend with the stateand zip code.This helps neither the respondent nor the mailer,assuchan envelooeis unlikelv to 6nd its wayback to the directrnarketer,ItsfiouHbe t pt"."a -itt an air mail mvelope with the letter "USA" - or the apprcpriate country dearly listed at tte bottom and with plenty of room for pootagestamps on the top right hand comer. . ln order to inqease r€sDonserates,North American direct markeiersgenerallyoffur toll freephoneand fax lirres. Unlortulately, tlresecannot be acc€ssed,for example,outsidethecontinentalUnidStates.Asarcsult,abusinessman 1994 ]HE AgiqN MAMGEF . FEBRUARY

wishing to respond instantly to a mail piece will find himselfwith no uwble phone,rr rar nLrmbers, forcmghim to go throug,hinrcm,r-

,,Allthe basio humanemotions

multinationaldirectmarketerswill p.oht in Asia. Far from it, but there are enough NorthAmericanandEuropeanbusinesses t!!ryld honaldirectory e"nquirt". i" rina',,jior'r.."ii;; successfullvselling everything hom high ly effuctive direct natives,often with-out succelis. hcket newslettersto training coursesand Hurdles such as theseare hardly likely to mailcopysuch even corporate grfts such as Collin Strâ&#x201A;Źet assistin generatint healthy responserates. Bakery'sfruit cakesto prove it canbedone. as geed, bal Second,there is a general lack of knowlThe key to succenslies in the approach. and ioy wlll be edgeand factual information about the Asran Durint the testphase,it is critical to takea just as â&#x201A;Źfbcllve market. To compound the problem, a multiregional - not national - apprcach, un"experts" in the Asian tude of seems intent on offering lessthe product or servicebeing sold is intemational direct marketeNadviceon entermaftetdace," unique to a speciticAsian countrv.laking ing theAsianmarketplacebasedon outdated a nahonalapproach;i.e.,decidingin adperceptions and misleading generalizahon-s; vancethatJapanis your targetmarket,is in fact, anything exceptcurrent, real-life experience. theequivalentofanAsianmailerdecidingthatArizonawill As a result,a tl?ical multinationaldirectmarketerwho genemte the belit responsefor his campaign before test has decided to test tlle Asian market often ends up with a mailins inb the UnitedStates. substantiallossinsteadt'fa 100".,r retum on his mlrletine Having recognized that the regional approach is the investmentjdnd subsequcnthwithdra\^s from the multi correctone for the testphase,the choiceof lists becomesall national direct marketing arenablaming Asian market important.On thewhole,regronalrespondentlistsoutperconolnons. form l(rcallistsfor a wholevarietyof re'axrns. including: This is not meantto imply that all North Ameican or . The respondenthas demonstrateda willingness and . FEBRUARY THEASIANMANAGER 1994

SPeakers H.[. Dr. AmnuayViravan,DeputyPrimeMinister,Kingdomof Thailand* TheHomurablef, HughFaulkner,FC, Executive Directof,Business Councilfor Sustainable DeVe|opment,Switzerland*Mr,DavidK.NewbiggingChairman,Rentoki|CroupPLC,|JnitedKingdom*Ml.HermanRona|dHochstadt,chairman,EC|C5Ho|dings,L Mr.L.GordonCrovitz,EditorandPublisher,FarEasternEconomicReview,HongKong*Dl.MichiyukiUenohara,EXecutiVeAdvisor,NECCorp [oyHeanHeon&DPM|,|P,Pre5identandChief[xecutiveofficer,TheMBfCroup,Malaysia*Mr.Richardcordon,chairman,SubicBayMeropo|itanAUthority, Fu||er,ChiefExecutiveofficer,MonjtorCompany,U5A*Mr.Katgok Limited,HongKong * Dat6FrancisYeohSockPinp GroupManagingDirector,YTI Corporation Consultants Berhad, Malaysia* Mr. AllanC. Howatson, SeniorResearch Associate, The ConferenceBoardofCanada,Canada*Mrs.BRAMooryatiSoedibyo,PresidentDirector,PTMustikaRatu,tndonesia*Dat6BaharuddinMusa,lointChie{Executiveo Devefopment Berhad,Malaysia * Mr. C.D,Tam,MBt lP, SeniorVicePresident andCeneralManager, MotorolaSemiconductors HK.,Ltd.,HongKong I Mr. R.D. Aga,Charrman and Mana8ingDirector,ThermaxLimited,/ndia*Mr'ArunMahizhnan,SeniorRerarchFe||ow, ThaniCorp.,Ltd',Thailand*Mr.ReneDomin8o,simeDa$yProfessorinManufacturjng,Asian|nstituteofMana8e I lwentylou & Caniage,Ltd.,Singapore intenationally renowned speakers will make Nesentations dunn, the @nierencc

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ability to do business beyond his national bor.rrdaries. . Where the responseinvolves pavment, it indicates accessand ability to remit payment in US Dollars, which is the currencv of intemational business,even in Asia. . Thelist is likely tobe anEnglishlanguage one, asEngiish is, realistically,the only common business language between all Asian nauons. . local lists,especiallycompiled ones,are ur ikely to beresponsiveor particularly accurate,especiallyin countrieswhere direct mail is not prevalen! e.9.,China. . Second,the packageshould be adopted to one Asian marketplace in at least 10days. As the degree of "adaptadon" that can be undertakenvariesconsiderablybetweentest and roll-outphas€s,eachchangeto thecontrol packageshould be considercdin the context of thesetwo phases,where relevant. 1. Lang!4|e. The languageto be used for your direct mail campaigncan vary tremendously asAsians speal over twenty different primary or national languages,with dozens of additional dialects used within the individual countries themselves. T€st - During the testphaseit would be sensibleto rcstrictvour direct mail Dieceto the English language and mail only-to English language lists. Not only can you keep costs under control, but you also reducethe possibili ty of losscausedby receivingresponsesin foreign languages. Rollout-Thereafter, vou mav wish to test l(Xal languagepackages- especiatlyfor;apan,KoreaandTaiwan- whicharethemajor industrialized countries in the rcgion that prefer to receivepromotional literatur in tJreirown language.Youmust,howevet make it abundantly clearthroughout the direct mail piece tlut the resultingpro<Juctor service being sold wiil bein theEnglish languageand requesttheir rcspons€in English on the order form. Future roll-outs could be mailed in bilingual packages. In Hong Kong for instance, you could use an English/Chinese package with the same tiext appearing in both languagesin the package.It is important to remember that the local language equivalent must not be a direct translation but a careful adaptationby a local specialist,failing which with unforhrnate resurs. 'vou could end uD -the 2, CoW. All basic human emotions triggeredby effectivedirect mail copy suchas gre€d,fear,jo, etc.will be just as effechvern theAsianmarketplace.A few basicguidelines do havetobe bome in mind, both thoughout the test and roll-out phases.Theseinclude: . Youmust avoid inflammatory copy.Singaporcdoesnot take kindly to p< itical interfer€ncein its intemal affairc;Indonesiais very sensitive to religious comments, especially aboutIslamandChristianity;Thailandissensitive to its public perceptionof loosemoral. FEBRUARY THEASIANMANAGER 1994

ity; and, all thesehave to be bome in mind to avoid offending any potential rcspondent's sensibilities. ln addition, therc are legal pitfalls such as requirin8 registration within the local jurisdiction if you shol d be offering financial services,as is the casein Hong Kong. . Severaltestshave shown that, generally speaking,short copy out?erforms its longer cotmtjerpart.Eight-pagelettersinvariably pull bettjerrcsponsesthan lGpage lettersand the relative rursophisticationof the Asian direct marketing industry may havea role to play in trus, . Whetier you use American English or English English is entir€ly at your dirretion. Youshould, however,bearin mind that ther€ can be some unfortunate side effects,espe' cially when undertaking translations for bilingual packages. For exarnple,"l have a flat tire," could be translated in Chinese as "Mv aDartment is exhausted," as apartments are known as "flats" in severalAsiancountries,while "ty're" is theEngJishq>ellingfor theAmerican "tire, " which Englishspeakingcountriesknow only asan altemative to "exhaushon." . Avoid localizin8 the cop_v When aF tempting to createvisual ima8ery,cop).writersinvariably usenon-standardlanguageand localrcferencestoemphasizetheirooint. Consider,for example,any kind of baseballanatogy. This is likely to draw a completeblank from people in Hong Kong and Singapore, althoughitcould triggersomerecogtuhonIn Japanand the Philippines, where baseballis more widely known. . Firully, bear in mind that English may not be dre first language of tlfe recipient. Although he may be able to speakand writie it, simpliciw of tone would be far more effective than complex jargon or the latest buzzwords. 3. D$ign. Once again, the relative unsophistication of most Asian markets means that extensive input to design and atwork is generallynot effective.As a rule of thumb, clean, simple, easy to follow design tends to generate better response tlran its morecomplexcounterpart.Afew simplerules worth nobne are: . Expensive and heavy paper stock is unlikely to be ju-stified,as it will add to yow postagebill, without necessarilyincreasing response. Eventhe most basicNorth Americanpaperstockis likely to b€acceptablewhen comparcd to its equivalent Asian counterpart. . The use of colors is particularly important.For erample,blackindicatesmoumhg in Chineseculhrc, esp€ciallywhen it borders a photogrdph.Redand gold areausprcious colors to the Chinese,but red lettering signifiesath reator challenseto somecommunities on the Indian sub{ontinent. . The complexity of opening, folding and

re-sealingthepackageespeciallyself-mailers, shor.rldbe bome in mind. Aqain, unlike their North American counterparts,Asiansarenot accustomedto packagesthat requirea degree in o/igdni to operate.If the dir€ct mail pieceis parhcularly complex or attractively packaged,it standsa greaterchanceof becominSa collectors'jtem than generatingrespon-se. 4. Cunencle3and pricing. Theonly hternational currencv is the United Statest\:rllar This is muallv true in Asia. Asia also - as a rule - ii less price sensitive than North America. This may have to do with the fact that relative incomesare increasinsat a dramatic rate and there is still a rarcity of Wesrem inJormation, goods and serviceswithin the Asian market. Furthermore,Asiansarepreparedto pay a higher price if they r.rnderstandthe goodsare to bedelivered from distantdestinationssuch asNorth America. Bearingthis in mind, currenciesand pricing canplay a positive role in increasingresponserates whm used as follows: Test- Ensue a singlepricing structur is offered in US$ or{y. The currency must be speciftedas "US$" and not $ throughout the packageas there are severalother dollar denominatedcunencieswithinAsia,all of which are worth considerably less than the US$. Paymentby credit canl would be vour easrest option, although you mav alsowish to accept bank drafts,but onlv if drawn on a USbank in the United States. Rollout -At this stagevou could incorpo ratetheability to cashpersonalchequesdrawn on US banks as well as acceptin8money in freelvconvertiblecurrencies;e.9.,Hong Kong Dollar,SingaporeDollar,.lapanese Yen,etc. Rememberto allow for the additional costs as,s(riatedwith convertins back to US Dollars. The use of lcral credii cards is likelv to Benerdtea substantialincreasein resporlse rates,especiallyin countriessuchasthe Philippines wherePesodenominatedcredit cards aremorewidespreadUSDollar denominated creditcands. India incidentally, is a specialcasewhere economicliberalization hassuddenlv opened up the market to multinational maiiers.lndianscanrcmit funds - up to US$300at a time - for authorized catetories of expenditue simply by completing the ReserveBank of India's Form 2A, supported by a proforma mvorce. By including details of this procedure,or better still, enclcninga pre-printed Form 42 and prGforma invoice,responseratesin India will exceedthose obtained by offering payment in US$denominated credit cards onlv Incidentally, for certain categoriesof erpenditur€, it is now possibleto us€ a "cashiering" serviceto convert Indian RuDeecheouesinto u>$ on vour behalt

5. PremlumS.Certain sectorsof the Asian direct marketplaceare already spoilt for 49

FEATURE

doice rn terms of pJemiums.The pubtishing lndustry |s a parhcular case n point. The following griidelinescanassistwith doubling r€s, ponseratesin Asiaduring both testingand nou-outDhases. . Non-editorial,elecbonicpremiumssuch ascalculatorsand world tim; docks tmd io work well in Asian countrieswith the general exceptionsof Hong Kong, Singaporeand Taiwan. This is hardly surprisine asthesekinds of electronicpremiums' tend io be nunufacturd and sola locaUyat exbemely low prices, therebyreducing th6ir perceivedvalue in the minds of potential rcspondents. lt would thereforebi better to offur editorial or related premiuns, whercver po6sible,and paruculadv in thesetluEemarkets. i geatinmind thatthepremium will carqr an intrinsic postalor delivery costin addition bothe actual cost of the premium ibelf and slrould thereforebeasliglitand easyto deliver asDo6$DIe. -. It is important to note that sweepstakes or lottery type offers are illegal in several Asian countries. Wherelegat,prior approval of the local govemmmt-departrnent conemed will be reouir€d. -Devlco. 6. R€oot|3e Responsecan be generated-bymail, phone or fax durlng both iest and roll-out phas€6.Where the maiiing is a business-to-business mail.ing offering a fa.l option is essentialdsit overcomesthe hurd les normaly associatedwith deliverability of mail from someAsian countries. As with North America, fax is immediate -catching theproopectwhenhe is athis mo6t lec€ptive - and shortens the lead time between mailing cosb and revenuesgmerated from responses.Forconsumerrnailings,mail is still the best form of response,although it would nothurt to offer a fai option in casethe r€spondentchoocesto r,rsehG office fax machine to'r€sDond. When Ging a reply envelope,ensue that you auow adequaltespacetor postagestamps which may be considerablyliuger'and more numerous than in North Ameri-caor Eurooe - and shou.ldsubsequentrcsponserates iustify it - discussthe tossibility of an intemational businessrcply envelopewith thepostal servrce. Telephonesarethe option leastlikely tiobe used,eicept duing thercll-out phase;hene local telephonenumbers are made available to Espo;dmts, with orders being taken and fulfilled by localagents,dishibutors or evena hrlly-staffu office of the multinational 7. Fulilmcxrt, Onceyou have receivedthe r€sponse,it rs your responsibility and good busness practice to deliver the product or seruic€ into the hands of the recipienr as quickly aspoosible,rcgardlessof the'distance involved. For this pu4>ose,a whole host of courier servicesare likely to be the mo6tappropriate, with DHL, FederalExpressand UfS, in pa.fl,

ticular,having estabtishedsubstantialoperations in variousAsian countries.By negotiating a discounted bulk rate, the cost of fulfilling orders by cour.ier should be no Sreaterthan registercd air mail. Normal air mail is not advised as anv-to thing with foreignpostalstampsis unlikely find ib way tiothe intended recipimt, especially in some of the poorer Asian countries. As r€gistering dnd irsuring the packageinvariably adds to the cost,th; finaidifferential between r€gistered air mail and couner u ur ikely to be substantial.Altematively, you could offer the recipient the option of recbiving fulfilment by c6urier for i modest additional fee,with over 50"/"likely to takeyou up on the offer 8. Tsxo3 afld Crl3toms Duttrs€. Asia is a web of custorns and import duties which afJectstheintemationaldirect marketer'sability to do businesson a substantial scale,at least initially. Thesevary corsiderably, from virtually nothing in Hong Kon& to l4 differmt ta),esand surharges on the import of selecteditens into Indonesia.The foliuwrng sbate$es may be used to overcomethis pari ticular hu.rdle: Tost- During the testingstage,it may be appropriate to make local custorts and import d utiesthesoleresponsibiiityof therccipient.Aslongasthisinformationisprcminently publistred - especiallyon tire fuponse device - and t}te firlfilment is undertaken bv courieq the chancesof the merchandisebeinl rciectedby the recipient due to customsand import duties is likely to be negligible. Roltout - Oncea testin theAsian marketplace has proven successful,and a specific country or countries have beeil identified as o{ering the best rcsponse raties,it may be advi.af le to€stablish; local forwading facility with bulk shipment being undertakm ho the local importiirg agent wh-"othen ananges lor cwtoms duties to be setded before fbrwarding dre goods on to the final reciplent. The logical conclusion of this would, of cours€, be eshblishing lour own ftrtl office facilities in the countrv, but this is onlv to be consideredwhere a wi.roleseriesof tesishave indicated that respon-ses will continue to pru vide the same hi!*r returns as those e\pcnenced initiallt even when ushg loially comDiledlists. 9. ]{ame and Addl€3a FomEts. This is a particularly difficult problem to overcomein Asia,which containsa multitudeof nameand addressint options. These range from the virtual standardization achieved in Sinsapore to the often chaotic addressingseen"in countriessuch asPakistan.When you add to this s(enariothe factthat a typical Hong Kong Chinesename can be listei in at leas'ieisht differmt ways, tie magnitude of theproblEm Decomescleaf. Ta3t - As a starting point to overcome this difficulty durlng the test phase,it is

necessaryto break down the name and address 6elds into as many different segments as possible; i.e.,"first name, middle name, sumame" rather than iust "name." This will allow you to allocatethe appropriate part of the person's name to the rclevant field, although it is no tuarantee that subsequent personalizationcanbe undertaken correctly. By doing so, however, you will stand an above-averagechance of being able to de. dupenamesintemallywithin yourown database,and offer your file for subsequmtrmtal in a forrnatthatwould allow it tobededuped againstothersby the list r€nter. Roll.out- During the rol l-ou t phase,you may_wishto undertlke some fo-rmof irrsonalization,but thjs is best left to ex&riencedcomputerbureauswho know which part of the person's name can be used for personalization in which country. _Asthe Asian direct marketing industry is only now seriously beginning to use magnehc tapes and diskettes, you would also find it a lot easier to obtain names on selfadhesive or cheshire labels initiallv, but it would still beusefulto requestrespondents to complete a detailed breakdown of the components of their name and address rather than rely on the information shown on theoriginal labelwhichmay beaffired to the resooise device. 10.T63t,T€standTo3tAgaln.If yourfiIst test does not succeed, don't despair, but consider at least two other testsasJollows: . Use the same package,mailed to a different seriesof lists. . Use a different package,mailed to the o cinal lists. By a processof deduction you will be able to determine if the list or packagewas responsiblefor the rcsults,and ifall3 testsfail to perform satisfactorily,you canreasonably consider your product or servicebetter sold in the Asian marketplace through other means;e.9., local agenls and distributors, rather tltan direct marketins. A firul noe of caution:beforeundertaking any direct mail campaipft, ensure Srat the logisticalarnerdmenGou-tlinedea ier (using "LJS$" duoughout,rEl"lyenvelopeswidr space fotrpGtage and tte leths "IJSA" - or your camtry's narrE at tre bott)rlr - nqFtoll fr€e phoneard faxnumbers,eh.)ar€alwa'sinplace. Tkse are tre avoidableerron, y* trey ap pear consishndvin diect mail oackae with *re blamefor tte resultingpooirspo"nse subsequody (andwlonglyt;atdilued 6 tc,lsian market. In Hont Kon& an old Chinese proverb notqs, "The joumey of a thousand miles b€ginswith a single step." By initiatint these chan8esto your conhol package,you will nave taken the stnqlestep necessarvto test the Asian market correctlv beforc h6pefully rollingout into thousandi of pieces6f proiitabledir€ct mail. I THEASIANMANAGER. FEBRUARY t9g4

J6u! G. Gall€3i06,Jr,

rules... Challenging existing

and SmatesY

Paraffi Paralysis "Paradigm paralysisis hazardous to a

company's health."

The Future,a an Discol,YrinS ! video by futurist foel Barker. I the Swiss watch industry is I taken as the best examole of paradigm paralysis. In 1968, Switzerland controlled over 65% of the world market for time pieces and took in more than 8ff/. of the profits. By 1980,its market share was down to less than 10P/o and its shareof Drofits had dropped below 20''l.. The culprit was the quartz technologyr€volution which the Japanesewatchmakers quickly piggybacked on. The irony was that it was the Swissthemselves who invented the quartz technology. However, their watch paradigm only accepted gears, bearings and mainspdngs, so they rciected the quartz invention. The rest is history Il recentmonths,l conducted five sttategic planning workshops with various types of orsanizations. In each of thes€ *orkshops, I detecd the syndrome of paradigm paralysis in one form or another, which inhibited theseorganizations from performing at higher levels of excellmce. In the following examples culled from thesestratetic planning workshops, thecountry, the industry and the organization have beendiscuis€d for reasoru of confidentiality. what is important aretheparadigm paralysls ressons.

Cae A tl|e Product Pandlgn Supodorfty CompanyA is known worldwide for the superioritv of Product Group A eicept in Country ABC, whet€ it is well-known for ptoducts in other industries. When Prcduct GrouD A was introduced to Country ABC a few years ato - at a time when the industrv was about to take off, it

lHE ASIANMAMGER. FEBRUARY 1994

stress€d superior product featurcs asits principal seltingpoint, thiesamemessagetheentrenched competition wis providint the customer. Since Product Group A belonged to an industry whose prcducts were quite expensive and b€cause the typical buyer was not knowledgeable about the finer points of the product's featurcs.the customer oDted for the lower risk altemative of buving the competition's produits which hewas verv familiar with. The result was a mediocrefourth place for Product Group A in tjermsof market share in an industry wherc it should havebeen No. 1 or 2. Toprove prcduct superiority, the onlv recourse oerceived to be avaiiabte was toiait for several yearsuntil product Group A had proven its value. Howevet waiting wassuicidal becausethe comDetition would have entr€nc-hedits€lf further in this fastgrowth market - to the extent that they could notb€ dislodged anymore. The solution I suggestedwas to changethe messagefrom one of product featue to a message that highlighted Product Group A as the best-selling product in moresophisticatedand demandhg markets abroad; and, that the competition's brands were

"Peodeuthocleate new paEdlgns are

rcudly ortslderc."

not farinq as well. A oue;tion will then aris€in the customer'smind: Why are the comDetition's brands (the brandsh-e'smorefamiliar with) farin8 poorly?At this point, the typical customer who gets lost in the product feature iargon may develop a prosperity for Product Group A, since performance in more dernanding markets mav provide a better yardstick thai the familiarity criterion. When the customer gets into this frame of mind, additional adve*ising now goes rn lor the coupdegrqce.

Ca3eB: Thotlbhc Foover Pa.adgn Companv B is in the fastfood industry ofeountry BCD where it belongs tiothe top ten in terms of sales,but it is still a far cry from the industrv leader.Exhibiting a very highlrowth rateand profitabilit, Company B has beensucc€ssfuldue to its niching stratjegy,wher€ it niched into a market segment that wanted a Drcduct line different ftom tllat being offered by the industry leaders. During the workshop, I asked the following question: If you diversified vour orcduct line to include thaiof the industry leaders,would you loseyour prcs€nt clients? The answer fiom the workshop participants was a unanimous "No!" However, there was a very obvious inclination to cling to the pr€sent product line which has provm to be very successful. When I pointed out to them that their long-term salesobiective could not be achieved since their pr€sent product line only cater€dto 2G30Pl"of the market. the idea of diversification into new product offerings became highly acceptable.

5'l

lateral or veftical transfersin the companycreate "instant outsiders."

C6e C:TheT]€ndParadlgrn

tainm€ntasits prcd ucts.Running a very distant second to the indnsby leadet it more or lessaccepd thissihEtionasDermanent Riause it was pardt'- but not maiority- owni{ bv fte ind ustrv leader,ii simplv followed thelatter in mo6tof its dlbrtainmerit activities. For example,tre leadet was very successfi-rl in capitalizingon fan loyalty, primarily towards iS entertajnersand secondarily for mls: ib membercompani€s.Sodid OrIs thereenough of a market to ganizadonE, but not as sucressaccommodatea doublinq ofvour tullv. alreadv ambitious sali oLiecil/hen the workshop qroup tive? Yes. Can Vou..rpe.uting admitted *rat the enteaiiti"o ,if and financialcapacihescope,rp tlrc leader will alwals be nuch with this twofoid inctease?y"". more popular than thme of OrWhy not go for it? Quite difficult, €lanizationE,everyoneagreedthis meaning more work and more sorry sifuation would always expeopleto hirc. Can t vou crv all ist SoI zuggestedanother*ay of ihe way to the bank?i.ootsiile capturingloya_tty. Why d idn't they a good time to shed tears. Foup meu competmgqltertainersby regrorusothatgeographical Case D: Ihe TonuF of Ofnce lovalw-regional rs aroused? ln Countrv Paradlgln fFC, loyalty was veri, OrganizationD is an indus- high.With everyoireacceptingthiL ky associahonlocatedin Coun- strategy,ittumed out thatftelongtry DEF which wanted to be as term objettive had a very good effective and as influential as chanceof beurgattained ii i-ruta another industry association in short span of two years. that country. The association president (only presidents of Pardgmd PanlysbRules member companieswere eligiSince a paradigm is a set of ble for this position) and his rules tut definesbinmdariesand board had a tenure of two years, tellsyou how to behaveinsidethe after which the board positions boundariesto be sucr€ssful,therc were passed on to other mem- is an implicit prcssur€to play the bers. game according to tho6e rules. Attended mostlybvcompanv Especiallyif a companyis not tle presidents,the wo;kshop fiialli, industry leader,paradigm pacameup with viable long-term ralystsmakeslfie comPanyquite objectivesand strategieswhen I myoprc, wruch prcmotes a tenpointed out to the group that d€ncyto play by theleader'srules. institutionbuildingusually takes . In CaseA, the industrv nrle many yearsto accomplish.This dictad product feah!€s-as the meant that the presentassocia- name of tre game.SinceProduct tionprcsidentwillmostprobably A was superior,Company A futt not have any maror proiects dre rules werc in its favor.ADparcompled at theendofhis term, ently, the anstornerwas pliying nor will his successor, and that it bv a differentsetof ruleswirich will most Iikely behis succes.sor's emphasized familiarity not onlv successorwho will reap all the with the company buf ako witir glory some five years down the the brand. rfrad.Onc€thispointwasaccepd CaseB utilized the nr.leof "if it by everybody,the long-te.ni "lainlbroke, dont fix it."Onlywhor Ftivel ang strate$eswereeasily Company B's executivesrcalized tormulated. that their long-term objectives could not be met by perpetuating C6e E: The Folou nte l€ade? arisk-averseaftitudedid theyagEe Pard4|r't to change the rule to "if it ;nt Organization E is an entity broke,fix it anvwav" owned joindy by rveral compiCaseCfotlowedthesterconpe nies. It operatiesin Countrv EFG hending rule. An accuate enhand basiaallyoffurs public'enrer- ronmental scan followed by an Company C is in the real estate business in Country CDE where it is one of the top five companies.Dudng the workshop, the senior executives arrived at a s€eminglyambihous. long-termsalesobiectivewhich was based on the high growth tr€nd of the compan),. At that point, my questionsand their answers went something like

honet appraisalof intonal operations revealed *re conservativenessof what appearedoriginally to be an aggr€ssiveposturc. In Case D indusky associatioru wually follow the nrle of one- or twcyear projecls,in line with the period of Flule of the association'sboard. Fortunatelv, 0reconflictbetweenthelong-gn; objectivesand the presentiay of doing thingswasresolvedin favor of the former. CaseE is anothertlDical sihEtion wherc the indusl; folower danc€sto the hme of itre leader, ther€by pelpetuating the sarne music botlle follower's disadvantage.By playing a differcnt tun€, OrganizationE may just tum out to be theband leaderin tlE fuhue.

Ihe &tslderSolutlon Despite the fact that mo6t of these organizations exhibited sound management, paradiqm paralysissti.ll entereddre plctire becauseo{ a t€rdency troatick to the old rules.In mv case,I was an oubider and was not Dart of the evistingparadigmssoI wasfreeto setupmyownnrlesandask "Why not?' Ba*er pub it apdy when he sa'E that people who cleatenew paradigmsareusually oubiders individuals who have no investm€nt and thercforchave nothing to lce. He further statesthat new rulesar€alrnogtalwayswrittq at the edge. This must also be the r€asoncorporate gianb such as IBM, Mercedes Benz, Wetinghouse, RJRNabisco and Eli Lilly recendyhired CEG ttnt were all outsideE An "outside/' mmtality can alsobe found iruide an olganizatioabutthereareusua$v6ryftw who poss€ssthis trait. A CEO or a senior executivethereforehas to be on the look-out for this tvDeof individuai durhg meetin2!-and brahslorming s€ssions.Or he can qeate one by efking lateral or vertical (but both inErdeDartmental)trarufersin the comfany, wheremanagersbecome"Gtant oubiders" in their rtew pooitions. Paradigmparalysiscanindeed be hazardous to a comDanv's healft Conriouslvand corutantlv changingthe nnei, however,cai.r spell the differtnce between industry leadershipand moribund mediocrity. I

. FEBRUARY IHE ASIANMAI.IAGER 1994

Robert V. Chand.an

Goldrush...

Findinga Partner foryourVenture "ln the earlydaysI did not carewhether a dealwasfair,I only wantedto startup my company."

rule in I f there is one golden "The one I business,it is that, I who has the gold makes the I rules." ln this month's column, I would like to look into ways of raising money for a startup colporation. Rulenumber one.No onewill put up money for your venture if you have no money and if you are not willing to commit all or at least a la€e portion of it to your venturc.Yourwillingness, to invest your own money intl the velltur€ is the litmus test for how much you believe in your own ideas. l,ly'henwe set up Chemoil we put in $120,000to start up the company. My own share amounted to $,10,000- for one third of the company.I was paid $50,000a year, a 40ol"cut in pay from what I was previouslv eamin& but enough to ma(e endsmeetinSouthemCalifomia. My other partners were silent partners. Ten years later, the company had trown into a $4O0 million revenue corDoration representhg a worthwhile investment for them and a drcam come true for me. In the earlv davs I did not care whether I receivedacut in Davor whether I owned a third of-the company. I only wanted to get Chemoil started. As luck would have it, one of the silent Dartne$ later sold his interesi to the company for fi0,000 - what he put in it. Soat the end of the deal i owned 50o/oof the companv How do you bu d ybur'equitv? This is themo6tdifficult Dart ofstarting a busines. Paryb fiave kied then hand in tite st(Xk market and rcal estate.[]x countries whereyou canleveragercalestate up to 7F8ffl. you can probabty build areasonableequiw baseover a five vearperiod. -to I chose take the real estate

1994 , THEASIANIIIAMGER. FEBRUARY

route becauseI realized I could then concentlate on other ventures aswell; r€al estatetook the better part of my weekends,but the rest of the week could be devoted to my core business. How do you find partners? I staited with people of means who knew me well. One of my partneni was my ex-bossat the cfmpany I had then recently left. .rHe became my partner in my venture after I spoke to him 0f my inter€tit in real estate. He asked about my most recent acquisrtions and t told him about the deal I was about to close which had to do with an 11-unit apartment building worth $750,000,and which required a down payment of $200,000.He said he wanted to be 50% partner. When I asked him to come with me to s€ethe propety, he said, "l don't have to. Your $100,000is woth more to you than my sharc is to me." Other possible sources are companies who service the industry. In the bunle ng business(fuel oil supply for shipping companies)thiswould meanthe terminal companieli barge com-

"Rulenumbelone: Noonewill back you ldeawlthmoney if yor arcnotwllll4 to commityourown moneyto the " ventute.

panies, and fuel oil suppliers. It is sometimes wise to start the company without adequate capital. Once the company be gins operating you can find the capital. -I've found that a lot of investo$ don't want to fund a start-uD.The kev to this sear€his to beai enthusiistic promoter of your ideas. One of-my friends struck up a conversation with a s€atmati| during a flight to New Yorkandexpoundedonhisideas for the companv he was about to -thing establish. One led to 0le other and within a week he re. ceived a phone call from his seat mate who - as it turned out - iust happened to manage a fund for high-tech com-Danies. There are as manv wavs to find a Dartner asthereate colors in the-rainbow. The imDortant thing to remember is that you must live up to your partner's expectations.They expectyou to make money for them; this should be one of your goals.The Eack record of an entrepr€neur is much like a resum6.Your Dast successesmake it easierfor you to raise money for a futwe deal, The next ouestion should be how to taise ; bank loan. Finding bankswho specializein your business is the first steD,In our oil busines the Eurooein banks we approached were specializing in lending bas€cr€dits. That is, they would take your invmtory and receivablesascollatera-l and would extend you a loan. ln the commoditv business,a dollar of equity * get you $5 of crcdit which ideally you could tum into $45 worth of sales. With a $10 million equity base vou could then theoreticallv 3upport salesof $450million. Thereare lots of ways to skin thecat. I

Antonb n, Sam3on

0n a scaleof...

"In a survey amongtwo hundred multinational c0mpanies, the Philippinesranked twelveout of twelve."

BeingNtmber Twelve Strffii*sd#

country got a bad press for let- people that need !o be invetiting tan&snJllthro€h tentswith gad, but imitated. . They have no hang-ups students inside them at Tiananmen (ls that lees serious about foreigners. Money has no particularlv when held in a coun- than brownouts?)? race,color or crced,Itiust creates And that other rising stat try onceconsidereda backwater wealth and iobs and'the multiand behind one'sown (they used Vietnam. Ddn't it use to con- Dlier effect of ttrcsetwo. . They do not consider busi- . to come here to study manage- sider devil as Dart of one word ment) now pulling resolutely thatstarted wiih/oreigfl ?What's nessman-bashing a national aheadand being given the atten- it doing up therc aheadof us? sport which anyone can join. How did evervbodv overtake Their taxes arc simple to figure tion and r€spect previously accorded to oneseelf - can be, usa out. They ate not considered well... depressing. What other Here is what the first elevm killing instruments to make word describesthe feeling? cou.nhieshave in common. people behave. If ther€ are tax e They reward businesssuc- investigatioru, they are quick. The Pacific Rim Forum with four hundred or so participants, cessby letting the investor keep Thereis no stripteaseof cr€ating held recentlyin Bali,had speaker his money and send ithomeif he anticipation or anxietv on who after speakerdeclaring the next wants tro.Of course, he doesn't. or what's next. A qriick ,udgcentury to be EastAsian. He wants to make mot€ monev ment, paymmt of the amount And here's the painfirl part. with it. and thearback to business. . They have simple rules . They understand that inThey rattled off country aftet country demonstratint bright which the whole bureaucracy vestrnentcannot come ftom doprospects and not once did understands and imDlements. mestic savings alone. Foreign Including the unwritt6n oneson caDital anybody mention the Philipis necessarv. . They realize ihey are comthe "extraordinary" expenses Dlnes. The only time in the plenary upfront. They don't up the ante p€ting for the same funds with sessionsthat the Philippines was in the niddle of plant construc- other countries. So, they put on mentioned at all was to say that tion, or have a new person from their make-up, swing their hips in a survey conducted among the other camp again asking for and advertise. Puckercd-up latwo hundred multinational a share of the extraordinary dies don't generateintercsl All companies in the region on the exDense... or e$e. they know is gossipabout pr€tty . Thev r€verc entr€Dreneurs girls with low morals. rnv€stmentathactivenessof each country in EastAsia, the Philip- and consider them heioes; not Isn't that list simple? pines ranked twelve. Out of Why can't we do the same? twelve. Tho6ewho know the answer to How can they ignore us that one s€em to have gotten we happen to b€ on the rnap. tir€d of r€peating themselves. All anyone talked about was Maybe, there is a method in China and its proiected 14% this madness.lf communists can become hter capitalists themSrowth rate... becausethings wete slowinf down after the s€lves, mavbe we should tum boom times. China was so frecommunisi first. quently mentioned that one felt That's why we're talkint tio like asking for a toothpick to pry our Reds. Thev mav be able to it out from between the teeth. teach us a thiirg oi two about Like bits of sweetand sour pork. money and how to athactit Wait lsn't China the country that but that means waiting to be usedbohaveRedasits fiEtname? come commrmist first and then You remember?That paticular introducing the free market afcolor used to dmote an aversion terwards. Why, that canbring us towards making money and to the year with the three zeros. lettingpeople keepit. And wasn't Voila.Thereis a plan, after all, it or y four years ago that this And we're stickind to it. I

"All anyone tdked about wre Ghlmandlts t4% FoJected glowthnte."

1994 THEASIANMAMGER. FEBRI,AFY

Mlchaol A, Hamlln

LIFEI[,

Samson says...

TheRealWorld erious people arc dense and know it," the decidedly and inspiringly unwholesome P. f. O' Rourke suggests,and "Serious tjopics make unimportant people feel as imDortant as what ihey are discusiing. " Polihcians, for example, are people who try to sound-serious all thetirne. "For someunlorown reason,people in power are supposed to beexperts.In all fields," saysAntonio R. Samson,Sothev tai<esounding serious, well, s6riously. It rnakes them look important - and electable. Howevet unimpottant people - for whom facing up to reality involves nothing more than an acceptablelevel ofrisk to the integrity of their psyche and self-esteem- will eniov Life in tlu Middle hne.It can broiden your horizons. Potentially and mercifully, those of your next dirmer comppnion as well, who may be too serious for his or her own gooo - or yours. The lirst vice president of PLDT is not a serious person. And that makeshim a great dinner companiory I hear It also makes him an unpredictable Manila columnist aciordine to F. SionilJose.Onewho, "seestiines differently - and more clearly than most ordinarv mottals," Armando Baltazar observes. Samson'spredictablyunpredictableinterestscover a broad - and gmerally ftee-wheelhg -spectrum. Cfuonologically,he reminisces, analyzes and forecasts.You won't read much adulation - of nations, people or gods - and his critiiis;s are observations of character,often lack of characte4 yet they are commentaries,not indictments. Even as commentary though, . they can dreadfully wound. "What do we put in the time

capsuleior theway we arcnow?" other retion in history. In a comhe asks. parison with the "Tigers" ofAsia, a Onemu)iestarconmaktmorc ne oDserves: nonev in a yearthnn two thoua Wehqwfue tiues thenumfur sqndschoolteachers... oI newsqry* Theycooerpoa More and morepeoplearcanIi t icaI scandals,netogowmmm t su,Yringthequestion,"lMo uill regulationson businessdnd inbe the next President?"with uestmet plansscraryd.. " anotherquestion:Doesit mata Their businessmen detennine ter?" whowill betheNiticians.-Our . Thercaremorcpeoplewriting politicians deteflninewho will columns.And because oJtnrd bebusinessmen, processots, their piecesare get. Theirgoueflne t's role is to ting longer.Not necessarily betsupqrt business,eliciting its ter.And notalwaworiginal. ideasonh,.o to improoetheecoHe do€snot preach,or expect nomic climate...Our gopefi's his readersto shlre his opinibns. me k to ftgulateand impose If they do, great; if they don't , restictions on businessoperathey don't matter an\,.wav tions... unl'essthey have a betier iciea. . Theyconcentnteon what is Concemed that the developWsible...Weduell on the iming capital market will rcmain a Wsible. preserve of the privileged and Much of his thinking has conwell-positioned, Samson de- cemed people Samsonknows scribesa brochure published by and works with (Uh{h). the unf ortunately f ictional entity, . Bores.ThebestaltenatiTteis "Doint Business in the Philipto ignorea bore,Youdon't euen pines." The "Housewife'sGuide haae to be polite. Once he to the Stock Market" counsels: launchesfuto the gloriesof eoe. ...it bnot rois to gettN ottarhed rything Wu hlnEnotexperimcd -yautn.That'srighr.Anddon't to a sto€k.Tteatit iust lifu tnv dtsryUe comdiit. UnlkeW; coTEryour mouth, hufuud. Or likeyourhusfund,as o Eqnatics.Youlikr CDk?lhmv thecay tny be. ftx thouwnd,what attoutW? . ,.. do not bea pig andhopethat Whotprid do Wu ptier? (PeyourP1canbecome P1N. Sure, rid? Idon't ewtren@rbr titles. thereis sucha lhing I just lile quietmusic as "hog heot)en." 'Tony totalkW.)h,Wlik Sanron, But you hqpeto die Bsch- urly or late? the flrst vice Hmn,IaTiftviotafrst. Samson is also presHcnt uhich pefoftiance? of wonied about the fu.nrotti atIt kala? problems that have PIDT,is not a B4orehelostuejght? hindercd-butlet's Catcha.You'uejust peFon. sedoG be fair, disabled become hisuictimfor theeconomicdevel- Ihat makoshim thenight. opment initiative of . Workaholics.A5 a geat dinnel the Philippines at a studelts, u\rkaholcompani('n," time when most of icsuerethetwwho Asia has been submitted.term WBrowing fastierand Wsthatuercthicker for more sustained than eoetVbody periods than any else's.They alanvs

IHEASIANMAMGER. FEBBUARY 1994

ll4IDDII tAN E did thebonuswo*, eaenifit uns on themigrotionpatten of sand cranes...Workaholics,unfortunately, nnke the bestsubodinates. It's easy to imagine a non-serious Samson having difficulty dealingwith the realizationthit he is, afterall, getting on in life. Old songsand Getting Personal can be terrifying. . Being Forty-Five, You are moretolerdntof othefs.Things thaf usedto irritate you - likt Woplewho cut you bf) on the highwoy,born-agoinproylwr s whoarc lookifigfor a conteston Bible-quoting,and littetuugs whothrowcandvu)raltet out of their cdr windci:n * ttou nsw shrugoff.ltllryargue?Whyconxlincethem?Life is tN short. a Old Songs.The greotestromancesandold songsareabout brokmrules,andheartssteryd onbecouseofthem. PIdvit agoin, please.And with feeling. o Geft ing P etsonal. Ahers un docfedth,ethingswiththcit PCs. Goodfor then. It's ce ainly muchfoster and morefrcient. Me, I'd ratherunfk on fiy Wd andthefllet my secretarydoher thingontheuo Wocessor.Typing, after oll, is not thesameas writing...I don't u,antto confuse the t?Lv. Oh well, "As Charlie Brown puts it: "Life is full of rude awakmings." Ltfe in the Middle Lane is a book about rude awakenings presented in small, munchablemorsels.And soeach pieceis finished off with a smile, or a chuckle. B€causeit's a relief to know that there is something we can do about these awful awakenings. We can refuse to take them seriously. And concentrate on more imDottant things instead. Seriously. I

Monette S, lturalde

Morethana restaurant...

Thehak Cafe renched with perspiration, his slight but wiry body straining with the load of the sedan chair recently vacated by the aristq. cratic British officer and his breathtakingly lovely Tai-Tai,the Chinese sedan chair bearer reached the top of the hill and headed for the almost stately granite building ahead.Leaving his sedanchair in the shadesafe from the merciless gaze of the noonday sun,theexhaustedman slipped thankfully into the dark, inviting interior. Over a century later, this charming granite building * perched at the top of Victoria Peak on Hong Kong island still welcomes weary travellers from all over the world into its cool, quiet interiors. Fiercely loyal residents also make it a point to dine regularly at The Pea-kCafd and enjoy its delightful ambience, steeped in Hong Kong's history - and romance. The Peak Caf6's transformation intri a Hong Kong landmark took awhile. ln 1947,the shelter for sedanchair bearerswas converted into a Caf6 serving light refreshments to visitors of the Peak.Soon,the Caf6 developed a loyal clientele, comprised of Peakrcsidents and visitors who wereeagerto savorHong Kong's

fr{*td

ra,

past.But the mvagesof time took their toll and the Cafe fell into di$epair In 1989,theCaf6'slandlord, the Hong Kong Govemment,closedit down. But not for long. Outbidding the tendersof other professional restaurantoperators,the pres€nt owners launched into the painstakingtaskof resto ngthebuildmg. Visitors to theCaf6canchoose from three distinct seatingareas, eachwith its own unique atmosphere. Located inside the natural granite wall of the origrnal building is the interior bar and seatingareafashioned in the old EuroDeanstvle and embellished with Chineseantiques. Warming one end of the restaurant is a wood buming fire place.The lofty trussedroof supportlng octatonal iron and glass chandeliers, the dark timber flooring, and the myriad of genurne antique paintings, screens,clocks, marble-topped tablesand fragile-looking chairs transport the visitor to the Hong Kong of old. Stepping through the arched granite doorways, oneentetsthe conservatory greenhouse, a recentaddition builtalong oneside of the original building. Overlooking the garden, the tlassmclosed conservatoryallows the visitor to eryoy a meal while communing with nature, whatever the clime. ln fact, it is an ideal place for enjoying high tea,while daydreaming to the gentle beat of raindrops. The verdant garden with slatewalkways graced with Eurcpeanwrought-iron fumiture - is a favorite eating area on sunny days and balmy evenings.Cozy tables at the Iar end of the garden offer a breathtaking view of the South China Seaand at night a

mantle of twinkling diamonds. How to reach The Peak Caf6? Gone ar€ the sedan chair bearers. lnstead, one can motor up through the steepwinding nrads. A more romantic way is by The PeakTram,which canbeboarded a short walk up the hill behind the Hong Kong Hilton. Seated comfortably in the recentlyrenovated,gleamingchromeand wood cable cat the visitor is transported almost lying down to the top of Victoria Peak. It is best to call ahead and make reservations, as this author discovered to her chagrin. A regular business visitor to Hong Kong, she had long dreamed of visiting Victoria Peak. When she finally had the opportuniry she was told at the doolr-'We're fulli comeback in an hour, " Believeme, ther€is not much to do in the vicinity on a cold, rainy evening. So we trooped back to the door and beggedto b€ let in out of the rain. Mercifully, the waitress pointed us to the counter of the open Fhow kitchen, where lndian tandoori chicke was being grilled. Perched on stools worn smooth by courtless derrieres,

"ThePeakCafi6 welcornes weary travellelsfromall overthewoddInto its cool,qulet interlors."

we decided to samDlethe extensiveselectionof fini wines while nibbling on exqnsite basilnoon brcad with balsmto creah al.d. smokedsalmon-Cheeksrosyfiom wine, we made our way to the conservatjoryfor ttle main meal. The sparc ribs were glilled to pedectiorycounterpoinEd by the delicatechuhela My dinnercompanion tackledwith gusto the stir ftied shltt ks noodleswith ba$ecued pork, pnwns and rallop brcchette.Warm bem/ compoe bakedin pufi pasty with ruri raisin ice qearn and cappuccinocofibe rounded out the meal nic€lla I- 'st Dec€rnberon a fr€ezingly , coro everung, we once more tekked to The Peak Ca€. This time, we sat by the rcarint firc. PamelaChoy,who representsTrr AsionMerugermHcrl:.9k:r:'g adld, joined us for dinnel, took over the menu selection.To tlraw us out, she ordered Tai Pafl crab bisaue with abaloneand crabmeaLTlim came an assortment of Thai smoked du& curry with drcny tomatoes and sweet basil; crist samcas 6lled wi*r sweet oeas andcilantro;kdd)anshittake,sipw peasand potato cuny; the usual stu fuied,shitto.kenoodles, and naanbtead. One thine that never rems to changeis the menu. And Martin C. Allies, general managerof the PeakCaf6 who brieflv ioined our table, aftests to that. Once management did try introducing new fare on the menu, only to be stormed by irate Hong Kone residentswho miss€dtheir favoiite selections. Some good things should never bechanged. I'm sure the sedan chair bearer would afieewith that. I

. FEBRUARY Tl{EASIANMANAGER tS4

The New Day Daw NS at

PACIFIC CORPORATION

-1ffi6:/7{

oday marks the emergenceoi Metro Pacific n,rmethatspeaks Corporation a ne$,,prestig,e oi the company'd s i s t i n g u i s h epda s ta s M e t r o D r u H ,i n c . Thus,like the risinBsunthat promisesa brandnervda1', M c l ' oP a ri i r r( o r p o r . t l i o n ' e n c d wJ. r l \r l .r r) m nr l n r * nll0 providequalityproductsand services.From life-s.rving productsandirombeauty/ medicines to health-promotinB hygieneproductsto packagingmaterial5, Metfo Pacitic Corporation's business isto keepyougoingand growing, dav afterday.