Competitiveness and governance

Of late, we have been blessed by more than a few positive news concerning our economy and society. There has been a transformation, from being the Sad Sack in East Asia to being the object of praise, without sarcasm, from the MD of the IMF. We should celebrate the gains we have made. We thank the lucky stars that have finally been aligned in our favor.

But we should resist taking on hubris because we have a lot of homework that remains to be done. Our ranking in the global competitiveness index puts us in embarrassing company. Our next to the cellar place in the ranking of corporate governance regimes, justified or not, makes us red in the face. We are far from the fork of the road, where we can take the definitive steps toward  full sustainability of genuine progress.

We should keep forcing the pace on our journey, never losing sight of the important goal we need to achieve: raising our level of competitiveness such that most aspects and sectors of our economy and society are marked with such distinctive traits as excellence, efficiency, and effectiveness; in sum, by competitiveness. Lest we forget, it is our level of competitiveness that determines the welfare we enjoy and the quality of life we provide for our people (as well as the respect we gain and thus deserve from other people).

Competitiveness: a 3-pronged process

There are many open approaches to raising our level of competitiveness.

One approach is to insist on high levels of excellence, efficiency, and effectiveness at all levels, starting at the personal level, up to every enterprise and institution, and finally ending with our macro-economy and society. Another is more pragmatic and focused: look at all the many indicators used in compiling the global competitiveness index; choose to work on select programs designed to boost our standing with respect to those indicators; and ensure that in the end our ranking moves up considerably.

Whatever approach we choose to take, we should never forget that the process of raising our level of competitiveness has at least three prongs.

We cannot concentrate on only one prong, while disregarding the other two, which are equally critical and essential.

The first prong, where we generally should begin, is presented by the economy. This has a dynamism of its own; and whether we like it or not, this has a discipline of its own. It demands openness, flexibility, smartness, and a pragmatic commitment to achieve technical, market, and financial results at any given time. It distances itself from pure and rigid dogmatism, with its emphasis on ideology and theoretical orthodoxy. What this prong demands is technical efficiency, overall effectiveness, and general ability to deliver breakthrough results in the face of ever-changing conditions. It demands a strategy that is well formulated and executed even better.

The second prong, where we face the tallest challenges, is presented by enforcement. It is never enough to have laws, or to enshrine rules and regulations in issued circulars and memoranda. It is also necessary to put up a system where laws, rules, and regulations have teeth. Compliance brings benefits, above all to those who actually comply; and noncompliance has consequences, in many instances, serious consequences. Such an enforcement system asks for regulators that are competent, professional, independent, empowered, properly resourced, and committed only to the benefit, efficiency and effectiveness of the sector they regulate. It demands that we are clear about the targets we commit to meet, the measures of performance we use to track progress, and the strategic initiatives we are resolved to undertake: it should then be possible for all, including the regulators, to check on the actual progress we have made.

The third prong, which we cannot afford to separate from every decision and action we take at all levels and in all sectors, is ethics. This acknowledges a dividing line, and a commitment to stay on one side of that line. This demands actualization of the ideals, the list of “should” and “shouldn’t” that we all carry in our hearts. This wins us a high guarantee of sustainability of the progress we make; and it enables us to live up to the demands and requirements of social responsibility, and our duty of responsible citizenship. It demands a culture of transparency, accountability, fairness, and solidarity with the common good of the economy and society as a whole.

These three prongs of economy, enforcement, and ethics are the three lens through which we look at and pursue our competitiveness programs. They show the imperative of striking a proper balance between the different perspectives of the reality within which we operate. The pragmatic perspectives of the economy need to be harmonized with the constraints set by enforcement and with the guidelines of ethics. For competitiveness’ sake, we do need to keep our feet planted on good economic and technical ground, without losing sight of the demands of enforcement and the regulatory environment as well as the ideals and normative guidelines of ethics and social responsibility.

Governance: the operative framework for competitiveness

The end goal of significantly raising our level of competitiveness, with the 3-pronged approach suggested, has brought into the forefront the demands of: a strategy properly formulated and smartly executed; a set of performance scorecards indicating targets, measures, and strategic initiatives; and a culture of transparency, accountability, fairness, and solidarity with the common good of the economy and society. These demands are the staple of good governance: we can meet them by using governance as the means to achieve competitiveness.

The demands of strategy, performance scorecards, and a governance culture are most effectively met by using the balanced and comprehensive framework of governance. This framework underscores the perspectives that must be considered when formulating and executing strategy as well as when reporting performance in pursuit of a strategy map, while observing a proper governance culture. The perspectives are three-fold:

1.  The internal strength perspective: this focuses on the investment we make on people so they are properly equipped, motivated, and empowered to carry out all their duties and responsibilities at levels of efficiency that contribute to the effectiveness and excellence of all internal core processes.

2.  The quality of service to customers and of care to major stakeholders so that the economic and social impact of all internal core processes is maximized. Customers are king; but other stakeholders have the status of princes, to whom we also owe loyalty and obeisance.

3.  The financial outcomes provide reasonable rewards to shareholders while at the same time opening new avenues for achieving breakthrough results that secure long-term strength and sustainability. Financial results are basic and fundamental; but they are not the only ones that matter over the long haul.

These three governance perspectives that we need to consider are in concept—and in practice should be—closely interconnected. Indeed, the internal strength perspective (with its stress on investment in people and improvement of internal core processes); quality customer service and care of major stakeholders; and financial outcomes as well as breakthrough results for sustainability: they are fundamental relative to each other. They support each other. Achievement in any one of them facilitates achievements in the others. Thus, we do need to take care of all of them so that as we make progress in any one of the three, we also are led to progress in all three. They make the strategy we formulate and execute, taking them into account, balanced, comprehensive, and systemic.

Precisely because governance demands that the strategy we formulate and execute is systemic, it asks that the time horizon we consider and adopt is long term. Here, the three “T”s of economics apply: things take time. But for as  long as we stay the course, and  we keep moving forward traveling on a day-to-day basis on the road pursuing our road map or our strategy map, then in time we achieve significant breakthrough results. Significant changes occur over time. We deliver transformative results, the type that in time fundamentally change our organization or institution. Those results transform us, enabling us to realize the vision or dream for a more ideal state for ourselves, and for our organization or institution. Instead of keeping the status quo, we end up becoming much better, i.e. more efficient; more effective; more excellent; and therefore much more competitive. It is in this light that we stress governance as the principal means to achieve our main aim, a much higher level of competitiveness.

Practical considerations moving forward

For competitiveness’ sake, where must we pursue and practice good governance? From the social standpoint, the answers need to be: at the level of individuals, families, schools, and small- and medium-scale enterprises in all our major business and nonbusiness sectors. These are after all the ultimate drivers of social change, and we have a whole society to improve and make much more competitive. From the economic standpoint, we also need to give the following answers: our corporations, our GOCCS/GFIs, our national government agencies, and our local government units: these are our major drivers of economic change. If we want our economy to become much more competitive, we have to put our earnest efforts in bringing the actual standards of governance practice in all of these!

Lest we think that governance is only for the long term in due observance of the Keynesian statement (to the effect that in the long run we shall all be dead, and I might add “transformed”), governance does ask us for milestones to reach and for several medium-term targets to meet. In this regard, we do have 2015 as the last full-year of the current administration. It is also the year when we host Apec (and we should have more than a few things to show to the 20 other economic leaders who shall be coming). It is also the year when Asean integration fully kicks in. It would be highly desirable if by 2015 we aim to have:

1.  moved up to the upper half of economies or countries included in the world competitiveness index.

2.  20 of our publicly listed companies among the top 50 Asean corporations with the highest corporate governance scores, using the Asean corporate governance scorecard.

3.  12 of our GOCCS/GFIs achieve institutionalized status under the governance program that the law has mandated for them.

4.  12 of our national government agencies, including at least 2 of the agencies identified under our commitments to the MCC, show that their governance programs have achieved breakthrough, transformative results.

5.  12 of our local government units become clear, illustrative cases of the transformation that can be initiated at the local government level.

Will achieving these targets make our economy more competitive and our society much better governed? The frank answer is “no.” We shall still have many objective reasons for not allowing hubris to get into our heads. But we shall have carved out for ourselves a strong, solid and credible platform from which we can vault much higher, to a level much closer to our dream and vision of becoming a country of good governance and responsible citizenship. We shall have taken an irreversible course on the pathway that ends up with transforming our country into one that most Filipinos can genuinely be proud of, because of our much higher level of competitiveness achieved through good governance.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. This was lifted from the speech delivered by the author in a recent ACCRALAW-MAP Forum on “Law and Business: A Proactive Partnership for an Investment-Friendly Philippines.” The author is chair of the Institute of Corporate Directors and the “MAP Management Man of the Year 2009” Awardee. Feedback at [email protected]. For previous articles, please visit www.map.org.ph)