The corporate state

Ben D. Kritz

Ben D. Kritz

In his column earlier this week, my colleague Mike Wootton made a critical observation: “If the Philip­pines is to develop as it should, then aside from regularizing the awful corruption, the politico-big business relationships [which nobody seems to talk about very much], allowing a middle class to grow to a size of real influence and power, and adjusting the educational system to encourage challenge and independent thought, there is a crying need for more professional and merit-based senior management which works together as a team toward shared objectives.”

That ironically reminded me of a quote from another author I enjoy, George Orwell: “Sometimes the first duty of intelligent men is the restatement of the obvious.” The absence of management competency—or for that matter, the corresponding lack of sincere ambition to exercise anything recognizable as management, skills notwithstanding—in the current Aquino administration was correctly identified as a severe handicap to the nation from the moment then-Senator B.S. Aquino 3rd hinted at his interest in the presidency over his mother’s still-cooling remains, and the multitude of problems that have blossomed in the past few weeks have tended to confirm it.

Given that President Aquino is the product of the same flawed system that produced Presidents Fidel Ramos, Joseph Estrada and Gloria Arroyo, it should be considered a result of rare good fortune that the current President’s predecessors actually had some management skills.

Ramos’ practical pragmatism was learned from his career as a military officer, and Arroyo’s model-based proceduralism was a product of her career in academia; even Erap, hapless as he was, had the benefit of experience as a city mayor. The Philippines’ fundamentally self-destructive misunderstanding of the concept of “the nation” found its most honest expression in Benigno S. Aquino the Youngest—a vaguely defined and self-contradictory humid cloud of sentiment, rather than as a quantifiable entity with a vision, mission, identifiable and unique resources and capabilities, and competitive positioning.

Viewing the nation as a corporate entity strikes many people as a rather cold perspective, but if the Philippines is to have any hope of overcoming its manifold problems and take what its people seem to feel should be its rightful place in the world, that’s exactly the perspective it needs to take. Here’s how:

*First, think of the country as a diversified corporation, and choose its leadership accordingly. The fundamental objective of any organization is to increase its capital and provide value to its stakeholders. “Capital” and the means by which its “value” is measured can be defined in a variety of ways, but running a business and running a country essentially work the same way: Both the shareholder and the voter are making an investment by transferring something which is of value to the organization, with the expectation of some positive return on that investment. The investor chooses a company based on its past performance and the strategy its management has laid out for the future, and the voter chooses a candidate in exactly the same way. There are not even any real differences in the forms of currency the two are risking—both invest actual money (purchasing shares in the first case, and paying taxes in the latter), and both hold the power of endorsement or rejection of the organization’s leadership through the vote.

*Recognize the need to develop strategy on two levels. Management icon Michael Porter first explained this concept in depth in a 1987 article in the Harvard Business Review, and his since turned it into one of his (many) mantras of competitive management. While his context was, naturally, actual diversified companies in the business world, it does not require much of a leap of the imagination to see how many of the key ideas can apply to any complex organization.

A diversified corporation like P&G, for example, is a collection of a number of business units that complement each other, but operate within their own separate competitive environments. Competitive strategy is developed at the level of the business unit, and has an operational or functional focus. P&G’s business unit responsible for producing brands such as Olay, Clairol and Covergirl does not and cannot manage its products using the same strategy as the Iams Pet Food unit; the products, the customers and, the competitive environments of the respective market sectors are all obviously quite different.

Likewise, the nation has different “business units” which require their own unique competitive strategies; the objectives of the Department of Tourism (DOT), for example, and the means to achieve them could not be applied to the Department of Social Welfare and Development (DSWD). Nevertheless, the strategies of the DSWD and DOT complement each other, or at least they should; making sure that happens smoothly is the job of top management, who achieves that by developing the systemic, conceptual corporate strategy. The corporate strategy is the philosophy and direction taken by the collective organization towards growth and improved performance in the broadest terms; the competitive strategies are that broad concept distilled into specific visions appropriate to each component’s different environments, resources, and products.

*Understand that there is a big difference between strategy and mere planning. “Inspecting” bus terminals, “personally overseeing” combat operations around Zamboanga, or “ordering” various agencies to do exactly what they already doing in the first place are not manifestations of a strategy. Neither is heralding the completion of a single bridge, or announcing the imminent start of construction of a 4-kilometer stretch of road in a major policy speech. These actions are, in the most generous terms, simple resource management. Strategy, at either the competitive or corporate level, is meant to improve performance, and according to Dr. Richard Rumelt, formerly of UCLA’s Anderson School of Business, there are only two ways to do that: an organization can either “invent its way to success”—he cites Apple’s development of the iPod as an example—or more likely, take advantage of some change in its environment.

Resource planning is important, but by itself won’t improve performance, or to put it in terms appropriate to the country-as-corporation, resource planning won’t raise the standard of living or the nation’s competitive strength relative to other countries. The reason why it won’t is because it only seeks to maintain the status quo, or, if the resource management is genuinely intend to result in improvements, incrementally bring the performance of the organization up to a normative level. A perfect example is the slogan with which President Aquino convinced enough people to vote for him in the 2010 election: Kung walang corrupt, walang mahirap—“If there is no corruption, no one will be disadvantaged.” That is not a visionary statement—it does express a goal which, if achieved, would represent an improvement, but only to a normative state. There is no stated aim in that for the country to perform better than the reasonable expectation.

It’s not really difficult to take in the country-as-corporation perspective, it simply requires a bit of confidence to imagine what lies beyond simple expectations, and to foster a mutual sense of responsibility between the leaders and the led to see that the investment is well-made and well-managed. The people of the Philippines and the leaders they rather indolently chose obviously cannot handle that at this point. But with the full weight of the implications of that shortcoming increasingly coming to bear, there is a reason to hope that these hard lessons may inspire someone to leadership along a far more productive path.




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