7th Refresher Seminar of Alumni Association of
the Philippine Executive Academy (APEX)

Keynote Speech Delivered by President Edgardo J. Angara
on the 7th Refresher Seminar of Alumni Association of the Philippine Executive Academy (APEX)
on 6 September 1984

Thank you very much Nene Estrada, for that very gracious and kind introduction. It is I think, always a boost to one's ego when fellow alumni say something nice about you. So thank you Dean Charlie Ramos, President Nene Estrada, my friend Jun Berba, Greg Imperial, Mr. Aguilar, fellow alumni.

Let me say right away that I am, indeed, honored to speak to you again because two years ago, I had the similar honor in Baguio, during your sixth refresher seminar and I wish to thank Dean Ramos and Nene Estrada for inviting me once again to this forum.

What I am going to discuss this morning are not really expert advice and opinion. They are partly based on my own personal experience as administrator and legal counselor to some business firms in this country. So I would like to put out the caveat and qualifications right away, that I'm not volunteering expert advice and suggestions. Perhaps what I will try to do this morning is only to identify the issues involved in retrenchment; and management experts like you, whether from the public or private sector, have a bettor appreciation and understanding of the appropriate strategies for survival which is the topic of your two-day seminar.

Let me, first of all, out to qualifications to what I will shortly say. The first one is that, in my opinion, the technique of retrenchment may be different, depending on the sector you belong to - whether you are in the private sector of in the public sector. I say the perspective of retrenchment is different because if you are in the public sector like us at present, there is one immediate constraint that you cannot do, you cannot lay-off people. But in the private sector the normal connotation of retrenchment is precisely first, perhaps, to lay-off personnel.

The second is that, the discussion often tell me, the focus of attention of this seminar is on the three basic components of an organization: man, money and machine. I would like to suggest that in any retrenchment program that you may come up with, you could not ignore the fact that all these three factors operate in a regulatory, legal and financial environment.

For instance, one cannot in the private sector, just simply say that this is the retrenchment program that we have, we will drop this one department without first having consulted the Ministry of Labor. Or in a finance company, one cannot just simply say we will close down or suspend operations without first having to go to the SEC, and if you are a bank, to the Central Bank. So with these two qualifications, I would like to present to you some ideas on your topic of retrenchment.

We all know that this is a time of crisis and retrenchment has become the rule rather that the exception. In fact, retrenchment is often the best scenario and shutdowns are becoming an increasing possibility. Retrenchment, indeed, has become a matter of survival.

For a better understanding of the gravity of the business recession hitting us today, it would be worthwhile looking into the current statistics. According to SEC statistics for the past seven months, business failure totaled 112 domestic stock corporations folding up or ceasing operations. This is three more than the 109 which folded up during a comparable period in 1983. The combined capital in these 112 business forms totaled P215 million, which is 61% more than the total capital invested in 1983.

This means that business firms that closed shop this year are definitely bigger in terms of capital resources that those which folded up last year. And the indication is now only that shutdowns are confined to smaller firms but also included some bigger firms this year. And for those who go on operating, the prospects of survival do not appear too bright, with mounting operating losses.

Just by definition, so that we can have a common frame of reference, I understand retrenchment to involve not just personnel lay-offs but retrenchment in the sense of cost-cutting measures. It is in that context that I am defining the problem.

The give us a right perspective on retrenchment, may I suggest that a few questions be examined. How should retrenchment be done and to what extent? How can we define the limits of retrenchment? How should it be pursued with the least negative impact on the human element: the manpower resources? How can retrenchment be considered an opportunity for innovation and creativity rather than as a damage - control measure?

As I said, we understand retrenchment is your context to mean the institution of austerity measures, to save on costs and therefore maintain the level of productivity and profit for the business firm. This definition, according to your discussion notes, embraces policy changes such as the restructuring of priorities and programs as well as the more judicious use of materials and equipment.

Let me inject now our limited experience at the University of the Philippines.

At the University of the Philippines, we have done this in 1981 when the crisis was still not clear as it is now. We have applied several retrenchment measures to be able to save on costs with such savings to be used to fund incentive allowances for our faculty and staff.

We have, for example, enforced savings as a mandatory measure, by simply cutting out on travel and seminars, energy conservation, fiscal planning and the generation of extra income out of non-traditional sources of revenue for the University. The U.P. in mid-1981 instituted a freeze hire policy. That was the first thing that we imposed because the University I guess, like other agencies in government (although we are not a government agency), suffers from the fact that we have one-too-many personnel not on the teaching level but on the non-teaching level.

As we know, personnel services in government constitute the biggest bulk of expense and so to cut on expenditures we thought that we should contain personnel hiring first. And we did that without damage to the efficiency of the organization and without laying-off a single employee.

At present, we are trying to explore the possibility of a four-day-a-week work schedule to save on energy. Now, why the obsession with energy?

We are now beginning to discover that the utility bill of the University is eating up 10% of our education budget. Out education budget is P500 million and 10% of that is P50 million, you can right away support five colleges in the University; but because of the high cost of energy, we have to set aside 10% of our education budget just to pay electric bills. So it is a critical problem and we are thinking of how to cut further our energy bill.

In so far as materials and equipment are concerned, we have placed emphasis on the proper use and maintenance of equipment. Again, there is a difference here in the care of materials and equipment: between the public and private sectors. I think many of you in the private sector know how well you take care of maintenance and equipment, but that is not necessarily so in public agencies.

One, the government does not provide enough maintenance funds to keep buildings well, to keep equipment running, and just generally to keep premises clean. We are lacking in the upkeep and maintenance of our machines and equipment. We make a conscious effort to re-orient our maintenance people, to put our equipment always in working order and if needs extra money to do so we do it because in the long run, it will help us.

The other measure we took last January - knowing that another round of inflation will be triggered off by devaluation was to ask our people throughout the University to give us a list of critical items that we need so that we could purchase them in bulk before the costs had gone up. Our people did come up with a list and, I think, In March we bought all those materials in bulk with a good discount. If we did not do that and just started purchasing them after May, we would have spent close to 30% more of the purchase price; so we effected some savings.

But over and above all we tried to review - not from the top but from the ground up - our own people involved in the work. We tried to review systems and procedures. For instance, we tried to find out how long it takes to process an appointment if one is appointed as Professor. How long does it take for him to get his pay?

We discovered that, unfortunately, the system was slow and too bureaucratic. And our people suggested that we shorten this process by reducing the 24 signatures to nine and the total time span of 3 months to 1-1/2 months processing. We reduced the time to half and with a small simple device like that, we have added tremendous savings both in time and in temper among our faculty.

However, I believe that what we have within the University are not really unique. We are just applying simple management techniques. You are all familiar with these, maybe the only difference is that there is now greater determination in all of us to effect these changes. What lessons do I derive based on this limited experience? Let me suggest three of them.

The first is the need for flexibility in plans. Plans cannot be written in stone or concrete. You must be flexible in your planning, because the times are fluid and they can change. So you must be in a position to change, modify or even drop some of your plans depending on the circumstances.

Second is the need for greater sensitivity. I think management or the management of crisis, because you are operating in a period of anxiety, requires a keener, deeper sense of attention - the ability to listen to other people in the planning process. That is what I mean by greater sensitivity.

And third is that there is no other time, but in time of scarcity, that you need the capacity to innovate. We all know that the most dynamic organizations are those which are not afraid to change and to innovate in the face of crisis. These are the organizations which continuously concern themselves with exploring ways and means to grow, not only for the present but also for the future.

I believe that the very essence of innovation is rooted in the virtue of self-reliance. I speak here of self-reliance not in a patriotic sense of the word but on the more practical approach in confronting change with change. I am sure that being exposed to the day-to-day business of managing people and machines, men and materials, you are in a better position, to determine what approaches you want to adopt, to enable your organization to weather the present crisis. However, I submit that basic to the administration of organizational development and growth is the creative management of change.

In reviewing our experience while operating under retrenchment conditions, I submit that it is very important to have an open mind and maybe good ideas will come from below rather than from the top. It is quite easy to enumerate the various changes we could adopt as a measure of retrenchment. It is however a different matter, deciding which measures in this list, we can actually implement.

Nevertheless, we should always bear in mind, that once decisions have been made, whatever they are, the most important consideration in the end, is still the human element. How do we lessen or minimize the impact on the person, whatever survival strategy is being adopted?

And so on that note allow me to close and once again, let me thank you for the honor of addressing you this morning.

Thank you very much.