Leadership and Organizational Development

*published in "Organization Development Practice in the Philippines" by E. Franco, M. Teng-Calleja and M.R. Hechanova (2018, pp. 257-273), printed by the Ateneo de Manila University Press in Quezon City, Philippines

12 CHAPTER

Leadership and Organizational Development Emerald Jay D. Ilac, Donald Jay M. Bertulfo, and Nicole S. Castro

Organization development focuses on improving an organization's efficiency and effectiveness using various interventions that target human capital, organization structure, processes, and technology. Towards this goal, leaders are key figures in OD because they set the direction of an organization and its activities and serve as change agents in moving the organization away from the status quo. This chapter discusses the literature on leadership in the context of organization development.

Transactional and Transformational Leadership Rost (1991) defines leadership as an influence relationship among leaders and subordinates, wherein each attempt is made to induce changes that benefit the other. Burns (1978) differentiates two leadership models: transactional leadership and transformational leadership. Transactional leadership is marked by a give-andtake relationship between the leader and subordinate, wherein the leader acts in accordance to expectations from the subordinate. It is essential to note that exchange relationships are not homogeneous, as the object exchanged may differ from one relationship to another. Transactional leadership is effective when leaders and subordinates perceive that their actions towards each other are fair. For example, research reveals that in organizations where exchanges of mutual support and emotional resources are more pronounced, subordinates are less likely to leave the organization (Graen, Liden, and Hoel 1982). Transformational leadership goes beyond mere exchange. Transformational leadership, as defined by Burns (1978), is present when one or more persons engage with others in ways that raise others to higher levels of motivation and morality; their purposes become fused; and their power bases are linked as a mutual support for common purpose. Transformational leaders not only address subordinates’ 257

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needs but also motivate, inspire, and empower them. According to the framework, this empowerment of both the leader and the subordinate can be explained in four distinct types of transformational leaders: the reformist, the revolutionary, the heroic and the ideological (ibid.). Several studies have sought to identify qualities of transformational leaders. For instance, Bass cited four major characteristics of transformational leadership: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration. Transformational leaders are role models for their employees and, as such, easily gain their trust. Their vision appeals to their subordinates, motivating them to meet high work standards as well as to align personal work objectives with organizational goals. Furthermore, transformational leaders stimulate creativity and encourage independent and critical thinking. They also take a humanistic approach to subordinates by attending to their individual needs and acknowledging the unique contributions of each individual (Bass 1985). Further studies also provide examples of behaviors exemplified by transformational leaders. For instance, Boehnke, Bontis, DiStefano and DiStefano (2003) operationalized transformational leadership behaviors as shown in the table below. These behaviors resonate with Bass’s characteristics of transformational leadership. Table 1: Definitions of transformational leadership behaviors (Boehnke, Bontis, DiStefano and DiStefano 2003). Behavior

Characteristics

Visioning

Leader communicates a vision of the future, shared by the members of the organization. This vision describes ultimate outcomes which people need to achieve and the leader expresses optimism about the future with strong expressions of personal confidence and enthusiasm. Transformational leaders lead by example, and thereby serve as role models who behave in ways consistent with their vision.

Inspiring

Leader generates excitement at work and heightens expectations of others through symbols and images. In communicating their vision, they express their dreams in highly motivational language. They give pep talks with high energy, optimism, and passion, which in turn builds confidence in their vision and self-confidence in their subordinates.

Stimulating

Leader arouses interest in new ideas and approaches and enables employees to think about problems in new ways. This transformational leader encourages rethinking of ideas and questioning of old ways of doing things. He or she actively considers “wild ideas” and encourages divergent thinking. Intelligence and clear reasoning are encouraged so leaders can select from among these creative ideas to solve problems.

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Leadership and Organizational Development Behavior

Characteristics

Coaching

Leader coaches, advises, and provides “hands-on’’ help for others to improve their performance. They listen attentively and express encouragement, support, and confidence in others’ abilities to achieve the high expectations inherent in the vision. They give positive feedback for strong performance and effort. Additionally, they provide opportunities for development by giving challenging and interesting tasks to their subordinates (as distinct from keeping all these kinds of jobs for themselves)

Team-Building

Leader builds effective teams by selecting team members with complementary skills. They increase trust and self-confidence in the team by sharing information, giving positive feedback, utilizing individual members’ skills and removing obstacles to team performance

Several studies affirm the connection between transformational leadership and OD. Givens (2008), for instance, reports that transformational leadership affects both organizational (organizational citizenship behavior/performance, organizational culture, and organizational citizenship behaviors) and personal outcomes (empowerment, job satisfaction, commitment, trust, self-efficacy beliefs, and motivation). Transformational leadership indirectly encourages organizational change initiatives by stimulating performance among employees (Moynihan, Pandey, and Wright 2012), and transformational leader behaviors are associated with lower employee cynicism about organizational change (Bommer, Rich, and Rubin 2005). Another study by Herold and others (2008) found a link between subordinates’ commitment to changes and transformational leadership. This result is echoed in a study by Hechanova and Teng-Calleja (2017), which found that transformational leadership, change management, and quality of relationships influence the extent to which employees value implemented changes in their organizations. Moreover, other researches have established the relationship between transformational leadership and empowerment (Jung, Chow, and Wu 2008). Transformational leadership fosters an organizational climate that supports innovation that may fuel changes in the organization (Sarros, Cooper, and Santora 2008).

Adaptive Leadership In recent years, another perspective of leadership that has emerged is its role in an increasingly dynamic world. Globalization, business internationalization and outsourcing, rapid technological change, cross-border communication and increasing workforce diversity, along with other economic and social changes, require that organizations be flexible and responsive to continuously changing world 259


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conditions (Lichtenstein et al. 2006; Schneider and Sommers 2006). In leading complex adaptive systems, leaders need to exhibit greater malleability, which is the crux of adaptive leadership. Heifetz and Linsky (2002) introduced the concept of adaptive leadership, suggesting many problems in organizations cannot be solved by a technical leader or relying on tried and tested methods. Rather, they argue that “adaptive challenges” are solved by introducing alternative solutions, experiments, new discoveries, and numerous adjustments. Thus, adaptive leadership focuses on the need to make their organizations “change ready.” How can leaders practice adaptive leadership? Heifetz and Linsky (2002) describe three key competencies of adaptive leaders: 1) observing events and patterns, 2) interpreting what has been observed and 3) designing interventions based on these observations and interpretations. To be adaptive, leaders must engage people rather than confine them to doing technical work. Leaders must counteract people's dependency and promote their own resourcefulness. This requires an extraordinary level of presence, time, communication, and trust. Specifically, leaders must undergo five actions that will aid them in practicing adaptive leadership (Heifetz and Linsky 2002): 1. Get on the Balcony: appropriately diagnose and see what is happening in order to take action with a plan. This requires discipline, flexibility, and a diagnostic mindset. 2. Think Politically: emphasize personal relationships by nurturing the necessary networks of people and partnerships. 3. Orchestrate the Conflict: leaders must know how to work with dissenting opinions and conflicts to reduce their destructiveness. A safe environment can be created where conflict can safely take place to control the level of conflict, pace the work, and offer a vision of the future. 4. Give the Work Back: leaders should give the work of finding solutions to the factions facing the challenge. 5. Hold Steady: being indecisive or acting prematurely can destroy any initiative. After interventions have been implemented, observations are again made and the loop continues.

Transformative leadership Organizational development initiatives aim to promote positive organizational change and transformation. Literature on leadership in the context of organization development has been consistent in emphasizing the pivotal role that top management plays in the success of change management efforts. Although traditional 260


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Leadership and Organizational Development

leadership models have provided valuable insights on leadership behaviors that help promote and enable organizational transformation, Hechanova and Franco (2012) posit that these models are missing important contextual elements. These elements transcend the locus of the organization and are subsumed within the larger socio-political context. Over the years, leadership theory has evolved to recognize that successful, transformation-enabling leadership is wellentrenched in and dynamically interacts with the wider social sphere. This view led to the emergence of a new brand of leadership called transformative leadership. More importantly, this kind of leadership appears to have promising applications in understanding transformation in public sector organizations, such as in the government and the academe (Hechanova and Franco 2012). Transformative leadership adds flavor to the usual leadership discourse by positing that organizations are not only entities with clear internal goals; they are also important stakeholders in effecting positive social change. Consequently, for organizations to become transformative (i.e., active promoters of social change and social justice), their leaders need to understand that the implications of their decisions and actions extend beyond the organization. Transformative leadership, therefore, implies that leaders are not simply managers but are also change agents both within and outside the organization. In addition, the recognition of the culture within which change occurs and their implications on leadership is critical. The role of leadership in change is even more critical in countries with high-power distance such as the Philippines (Hofstede and McCrae 2004). Filipinos are described to be leader-centric and obedient to authority (Jocano 1998) and as such, leaders in the Philippines strongly influence the direction their organizations take. Factors such as trust in leadership and political will have been found to be critical elements in transforming organizations (Hechanova and Franco 2012).

Leadership and OD in the Philippines In this section, we discuss specific cases of leaders who have executed OD interventions in the Philippine context. Briefly, these cases will discuss how they addressed systemic concerns in their organizations, as well as how they spearheaded both big and small change initiatives in all levels of the organization. The first case features a leader who initiated a major transformation in the public sector, specifically in the Civil Service Commission (CSC), the strategic human resource and organization development body of the Philippine government.

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A Doctor’s Touch: The Leadership of Francisco Duque III in the Civil Service Commission by Nicole S. Castro “An organization must always be considered as if it were one, connected living organism.” This is one of the leadership principles of Francisco “Doc” T. Duque III, former chairman of the Civil Service Commission (CSC). Perhaps influenced by his practice as a doctor, Duque believed that organizations needed to be responsive to their environment. He also believed that, “Ang sakit sa kalingkingan, sakit ng buong katawan” (Pain felt in the finger is pain felt throughout the body), thus, what happens in one part of the organization affects the other parts as well. When he assumed leadership in 2009, the first thing he did was to diagnose the overall situation of the CSC. Looking both at what was happening externally and the mandate of CSC, he felt that the CSC was “asleep,” because it focused on personnel administration instead of acting as the overall human resource and organization development unit of the national government. Reshaping the Organization’s Culture Duque found that the employees of the CSC were content with the administrative tasks of administering exams and reviewing cases, which he found a waste of their talent. Instead, he encouraged the employees of CSC to think of themselves as catalysts rather than robots. He removed the term “personnel” from all their offices, documents, and overall communication. Moreover, he encouraged them to think strategically by initiating a clear and concrete vision for the CSC: to become the center of excellence in HR and OD in the whole of Southeast Asia by 2022, and in the whole of Asia by 2030. Initially, many people in the CSC resisted this change. They found the goal too ambitious, and were worried they were juggling too many projects at the same time. To address this resistance, Duque initiated discussions with colleagues from all ranks, asking them why they chose to serve in the public sector and helping them understand the reasons that they themselves would want to change the CSC. This process of encouraging people to go beyond their comfort zone then became the foundation of transformation in the organization. Stretching the Systems One of the major interventions in achieving CSC’s new vision was the establishment of the CSI (Civil Service Institute), which centralized all the training programs provided by the CSC. With the assistance of the Philippines Australia Human Resource and Organisational Development Facility (PAHRODF), CSI focused on creating competency-based standards for all government positions and standardized HR procedures. An outcome of this was the Strategic Performance Management System (SPMS), which sought to shift the focus of evaluation from activities to outcome and build a culture of continuous learning as well as coaching in the organization. The CSC also instituted PRIME-HRM (Program to Institutionalize Meritocracy and Excellence in Human Resource Management), which provided quality standards by which government HR units could evaluate themselves against.

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Recognition of the Changes Duque encouraged external auditing of CSC to create a benchmark for quality control and continuous improvement. In a span of five years, CSC’s efforts at transformation were recognized by various bodies: The Trailblazers Award of the Performance Governance System, ISO certifications in the core processes of the CSC, accreditation from the UK-based Investors in People (with CSC as the first government agency in Southeast Asia as recipient), and a very satisfactory score in the Anti Red Tape Report Card Survey. Leadership and Transformation in CSC Even as he acknowledged his role in transforming the organization, Duque always returned to his belief that the organization was one living organism. As such, he said, “it is not the leadership persona that is important. Of course, leadership is a means—but leadership must be able to transform the organization, and then other organization members can assume leadership. It becomes organizational leadership rather than a personalistic [sic] leadership.” He explained that organizations, even with good leaders, tend to regress once those good leaders leave; thus, he believes that the change should stay with everyone in the organization. He refers to this as “transcendental leadership,” a level beyond transformational leadership. If transformational leadership results in the leader inspiring the followers, transcendental leadership results when employees are in sync across levels (vertically) and departments (horizontally) wherein change is managed and sustained. Now that his tenure in the CSC has ended, Duque watches the developments of the CSC from afar. He notes that the CSC prides itself on its achievements as the number one constitutional body in the bureaucracy and is confident that the organization will reach its goals by 2022 and 2030. He believes that, as they have proven in the last five years, the CSC organization is always ready for the challenges that lie ahead. Source: Duque, Francis, III T. 2016. Interview by Albert Thomas Factor and Nicole Castro.

The next case below, which tells the story of Fr. Bienvenido Nebres (Former President of the Ateneo de Manila University), demonstrates how his change leadership behaviors has transformed an academic institution. Revolution and Rootedness: Fr. Bienvenido Nebres and the Creation of the Loyola Schools by Nicole S. Castro Fr. Bienvenido Nebres SJ, in his 18-year legacy as president of the Ateneo de Manila University, was both a change leader and foundation of values as the institution underwent significant changes. One of the most significant transformations that

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occurred during his tenure was the transformation of the College of Arts and Sciences into the four Loyola Schools (humanities, social sciences, science and engineering, and management). In his first year as President of the Ateneo, Fr. Nebres reacquainted himself with the school’s culture. Having been away for 13 years due to other Jesuit assignments, he understood that he had to “get a feel of the place again” (Hechanova 2012). As he reacquainted himself with the university, he also placed emphasis on understanding the Ateneo environment (ibid.). He recognized the fast pace of globalization, and felt that there was a need for Ateneo to catch up and address two gaps: first, the competitive gap and secondly, the poverty gap. The competitive gap entailed catching up with the developing pace of Eastern and Southeastern neighbors, whereas the poverty gap stressed the need to minimize the distance between the rich and poor (ibid.). To address these gaps, Fr. Nebres and the Ateneo board of trustees began strategizing for the university’s future. In 1994, Fr. Nebres presented a paper entitled “Core Values: Ateneo Future Plans and Directions” to stimulate the discussion on the direction the university should take in the future. An important decision that had to be made was whether the university should focus solely on its formative role towards students, or widen its focus by training professionals. Eventually, they decided to focus on both, and this decision became both the framework and mandate that would guide the transformation of the College of Arts and Sciences into what is now: the four Loyola Schools (Hechanova 2012). The transformation involved revising what was integral to the university’s identity: the core curriculum. Given the dual foci on both formative and professional development, there was a need to streamline the core and allot more units to major subjects (Hechanova 2012). Fr. Nebres knew that this entailed intensive dialogue across schools, offices, units, and even alumni, so his first major milestone was to persuade as many stakeholders as possible to embrace this development “I had to keep explaining why the changes were necessary,” he said. Given the initial resistance from various units, the university requested the Ateneo Human Resource Center (now the Ateneo Center for Organization Research and Development) to conduct a series of workshops called “Softening Boundaries” for participants to understand each other. The groupings in these activities were strategic, composed of members from the different departments so that they could engage in dialogue with each other (Ruiz 2011). However, rather than discussing the revision of the core curriculum, the workshop focused on their own personal stories so that they could understand where the other was coming from. This paved the way for smoother discussions when it finally came to the revision of the core curriculum. Two years after the extensive discussions, the revised core curriculum was presented to and approved by the School Council on August 1996 (Hechanova 2012). With the new curriculum in place, the implementing structures followed; as a result, the College of Arts and Sciences was divided into the four Loyola Schools (humanities, social sciences, science and engineering, and management). Leaders were selected, and each unit underwent detailed action planning until the new structure was fully functional in 2000, with Dr. Anna Miren G. Intal as the first Vice President for the Loyola Schools.

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Afterwards, Dr. Intal, the four deans of the newly established schools, and Fr. Nebres began drafting a strategic plan for the next six years. They obtained inputs from the departments as well as from the board of trustees. To ensure alignment, the plan was cascaded down to the schools, departments, and offices. Various action steps were incorporated into the plan, from establishing unity in the design of the Ateneo infrastructure, focusing on knowledge building (i.e., increasing investments on research grants), to spurring environmental management initiatives. All these were aimed at addressing both the competitive and poverty gaps, as well as the intent to develop professionals for others. Fr. Nebres not only led the university forward with the goal of addressing the competitive and the poverty gaps, he also kept it grounded by clearly articulating the values to be upheld, namely cura personalis (i.e., viewing each person as unique, a person before God), and engagement with the world (Hechanova 2012). Having these values was important because the university needed a firm, unified identity that would safeguard it from merely following the trends of the outside world. Fr. Nebres summarizes his sentiment: “The greater the pull of the mission, the greater the pull outside, the more you must invest in keeping your identity clear. Otherwise, you lose yourself very quickly.” Revolutionary in his strategic thinking and rooted in the Jesuit tradition, Fr. Nebres exemplifies the dual roles of a leader: as innovator of change, and as foundation of stability amidst the change. By being both, he demonstrated what it meant to pursue uncertainty but with a sense of direction. In his words, “You have to know the world of your time and you have to know yourself, so you don’t lose yourself as you engage with the world.”

The next case features the growth of an NGO through the leadership of Dr. Aristotle Alip. It discusses how change management and strategic vision helped him in creating processes and opportunities for the poorest in the country.

On the Wings of Change: The Journey of a Leader to Build Banks for the Un-Bankable Poor by Rosalina O. Fuentes, PhD Aristotle Alip, born into a family of educators and deeply influenced by his Jesuit education, dreamt of living in a world without poverty. He spent nine years working for the Philippine Business for Social Progress (PBSP), an organization oriented towards social welfare and nation-building, but was still dissatisfied: he wanted to put economic opportunities – and the ownership of those opportunities—into the hands of the poorest in his country. He left PBSP in 1987, in the company of three like-minded associates, Dolores Torres, Lorenza Bañes, Epifanio Maniebo, and later, Flordeliza Sarmiento. They were bonded by a firm resolve to grow a Center for Agriculture and Rural Development (CARD) in response to an irresistible call to help the landless rural poor, who constitute the un-bankable sector of Philippine society. However, although they

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were highly committed to this dream, dedicated and focused, they had limited resources. As an initial input, Alip shared a small physical space in his family’s school in San Pablo City to be used as an office. Thus began CARD NGO, the first of the CARD MRI’s (Center for Agriculture and Rural Development Mutually Reinforcing Institutions) – precursor to the first microfinance-oriented bank in the Philippines. Founded in December 1986, CARD began operations in July 1987, offering small loans from 300 - 500 pesos to farmers who needed the capital at the start of the planting season. Rolling with the Punches Initially, CARD was met with skepticism and even ridicule from farmers about their novel idea of a micro-loan, which was payable in lump sum at harvest time. However, Alip and his team were convinced that providing micro-loans to farmers without any collateral and just a promise to repay at harvest time was the most appropriate way to help the un-bankable poor. Against these odds, there were more rough times to come. Seasonal challenges including typhoons, extreme heat, and life-decimating dryness nearly overpowered the aspirations, focus, and good spirits of the team. A Pause for Self-calibration and Learning Determined not to let go, the team ventured to listen to their target clients. Alip turned to education, seeking what he had to know about the complex situation, developing his capacity to lead and to change. He entered the Southeast Asia Interdisciplinary Development Institute (SAIDI) Graduate School of Organization Development to learn more about the discipline of change. This exposed him to a systemic view of change, as well as both the diagnostic and dialogic processes that can turn change into a world of possibilities and gains. The greatest lessons Alip would bring forward in and with CARD NGO involved people care, valuesdriven processes and exchanges, and a learning and inspiring leadership based on religious commitment. These lessons were put to test in 1995, when Alip’s team was preparing to expand operations. Two agencies that promised CARD NGO grants to expand operations advised them that their focus and interest changed. The disappointment hurt Alip, but only briefly. Fortunately, even when those two doors closed, a new one suddenly opened. A Dilemma Flipped into Friendship and Redirection The assistance of Mr. Takayoshi Amenomori and the Japanese NGO Asian Community Trust was central to how CARD overcame its major difficulty. Amenomori, ACT’s secretary general, approved funding in 1988 for a CARD project for rural women in San Pablo City. Alip hosted Amenomori’s visit to Masbate, where he saw the face of poverty among the farm women of Masbate, and also the dedication of the CARD staff as they stayed together in a rent-free room at the back of the market, working around one table, meeting and eating together like a family. This began the 29-year connection of Amenomori to CARD MRI: “I trusted CARD and CARD more than delivered.”

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Slowly, Alip’s dream became clearer: set up a bank where both access and control are in the hands of the poor. He also had a distinct strategy: “trap the savings in a bank for the poor and use these savings as their equity.” In 1997, CARD Bank earned its license to operate as a microfinance-oriented bank from the central bank. This was a peak moment for the CARD family. However, in 1999 strategy differences emerged among the CARD team, and Alip decided it was time to search for a new way of doing business. He sent Torres and Bañes to Bangladesh to observe and gather new information and updates on the business of the Grameen Bank (Bangladesh), which was then suffering from a slump. They were also to find out about the ASA (meaning Hope) method in micro-lending. The contrast between the Grameen and ASA models brought about differences within CARD: Torres and Bañes preferred the Grameen model while Alip preferred ASA, which revolutionized the existing accounting and operations processes. Focusing on the issue rather than team conflicts, Alip offered to take on the leadership of CARD NGO and to let go of CARD BANK, entrusting its leadership to Torres. As a first step in shifting to the ASA system for CARD NGO, Alip sought out ASA founder, Shafiqual Haque Chowdhury. Under his tutelage, Alip started a pilot ASA project. This rapidly grew from one project then to another and then to 10 projects. Shafiq recommended running the pilot in the Laguna area and then expanding to Northern Luzon. Then followed a most rewarding surprise – at 18 months of the implementation of this ASA approach, Alip succeeded in growing the client base of CARD NGO to 200,000. This quickly brought the CARD BANK back within the fold, reuniting the original team to the ASA approach. Alip and his Leadership of CARD Alip’s leadership evolved in ways similar to the evolution of CARD NGO to a total of 14 mutually reinforcing institutions: CARD MRI

Year Founded

CARD Inc.

December 10, 1986

CARD Bank, Inc.

September 1, 1997

CARD MBA (Mutual Benefit Association, Inc.)

September 1999

CMDI CARD MRI Development Institute, Inc. (CMDI)

February 2005

CARD MRI Insurance Agency, Inc. (CAMIA)

June 15, 2007

CARD BDSFI (CARD Business Development Service Foundation Inc.)

February 18, 2008

CARD MRI Information Technology, Inc. (CMIT)

2010

BotiCARD Inc.

February 2011

CARD SME Bank, Inc.

July 25, 2011

Mga Likha ni Inay (MLNI)

2013

CARD Leasing and Finance Corp. (CLFCC)

January 10, 2013

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CARD MRI

Year Founded

Rizal Bank, Inc. (Microfinance Oriented Bank)

January 25, 2013

CARD Pioneer Microinsurance Inc. (CPMI)

2014

RISE (Responsible Investments for Solidarity and Empowerment Financing Company, Inc.)

2014

Alip’s leadership started as a dream shared with four others. Conversations about this dream took place while they were still at PBSP. Torres recalled: “All of us would spend our non-office hours in a hut in the middle of the fields talking endlessly about our yearning. And every conversation we had, the yearning was getting stronger and really pulling us even stronger to do something about our shared dream.” Alip was central to the dream and desire to build banks for the unbankable poor. He was also ready to leap into the unknown, building as he went along, working through conflicts, changing context, applying new models—but never losing dedication and passion, vision, and determination. Thinking systems, keeping people first, and holding awareness of mindsets were his tools to make CARD MRI’s future. He held a unified approach to change, and considered buy-in as a must-do activity for a starter. He also ensured yearly spiritual space for all the CARD leaders, and regularized rites and rituals. He provided CARD with a song, pledge, and flag megaphoning CARD MRI identity and branding. He standardized systems and procedures. His people care was centralized in an institutional Human Resource Group, and made sure there were celebrations for anniversaries and planning, including reflection-pauses to discover new actions and new perspectives. Aris Alip evolved as a leader without a roadmap, just like the evolution of CARD NGO into CARD MRI. He thought he knew the terrain, but found out he needed to shift from merely seeing the future to making that desired future with his team. His “maker instinct” can explain the many organizational realities created after CARD NGO became a successful journey.

The last case features the role of leadership in building and sustaining a family business as it expanded.

Workplace Application: Leadership and Culture-Building at HBC, Inc. by Marcial Orlando A. Balgos Jr. HBC Inc., one of the country’s foremost beauty products retailers, was founded in 1993 by spouses Drs. Rolando and Rosalinda Hortaleza, out of stores they inherited from Dr. Rolando’s parents. Starting with products for professional beauticians like nail polish and cuticle removers, HBC moved on to selling own-branded products (San San makeup, Allue cosmetics, Natural Body Recipe products, Hortaleza Professional, etc.) in their HBC store concept. Today, the company is a multi-billion-

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peso company expanding to more than 200 locations nationwide and into the Southeast Asian region. It has also expanded into grocery retailing with its newly acquired ShopMore store concept. Communicate Directions HBC’s leaders are clear about where they want to take the company, and they make sure every person in the company understands these directions. This usually takes the form of communication meetings, as described by Roehl Dumlao, President and Chief Operating Officer (COO). According to him, “We give clear directions. And then of course, since we have layers, so from management team, we cascade it to middle managers, they cascade it to frontliners” (Dumlao 2014). Identify Clear Unit Goals and Accountabilities For HBC, this begins with the clarity of the CEO’s vision: “Kailangan very clear ang goal mo at purpose ng company (Your goal and purpose for the company must be very clear). When you say, ‘Giving the right to everyone to be beautiful’— lahat nasa mindset namin (everyone is in our mindset)” (Hortaleza 2014). This is translated into various strategies culled from the analyses of external and internal factors, then formulated into goals, that are then broken down per unit and per person. Multiple Levels in Strategy Formulation, Planning and Decision-Making Although the vision of HBC comes from its CEO, it is not a leader-centric organization. Its leaders promote communal planning and decision-making and deliberately asks suggestions from the employees. Dr. Rosalinda Hortaleza, chair and chief executive officer, said that even warehousemen submit proposals that promote cost efficiency. “It works!” she said. “Hindi lang yung hinihintay pa yung top man (People don’t just sit around and wait for the top man)” (Hortaleza 2014). Princess Fabian, the company’s Human Resource manager, also described the planning process as bottom-up and collaborative, from salesmen to store managers to area managers: For the Pre-Ops plan, o kaya (or) for the Store Operations plan, ang daladala nila (what the area managers would bring) would be from their store managers. Kasi yung plano po ng (Because for the plan per) area, that’s composed of several stores. Yung (The) . . . store plan po, galing po iyon sa (comes from the) Store Manager. (Fabian 2014). Install Information, Control, Feedback Systems In HBC, it is important to make sure that employees are indeed performing their tasks, although the leaders take care not to be overbearing. Dr. Hortaleza has Balanced Scorecard-based company performance indicators that she checks regularly. Meanwhile, Dumlao relies on meetings, status reports, and even the good old bulletin board. “So we had to change the logo of about 175 branches. So meron kaming malaking (we have a big) board. ‘Saan na tayo dito (Where are we currently on this matter)?’” (Dumlao 2014).

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Reward Systems HBC makes sure that rewards given to employees are relevant to them. For example, the company has a wish system for its good-performing employees, aside from the usual merit increases and incentives. “Yung magandang performance (If you perform well), you can have a wish. Pag performer ka (If you are a performer) this month, next month anong wish mo (what will be your wish)? Bibigyan namin sila (We will grant that wish for them)” (Fabian 2014). Sanctions, moreover, are as important a component, especially for poor performers. These sanctions make sure that the good performers get reinforced for their efforts. Dumlao said: “Or, because of your performance, or talagang wala (really nothing) . . . in terms of values, hindi ka naka-align (you are not aligned). O may ginawa kang kalokohan, out ka na (Or if you do something out of foolishness, you’re out)” (Dumlao 2014). Although many processes of HBC appear Western, the Filipino tradition and work culture are quite evident. The owners are both parental and authority figures and this is evident in how they interact with employees to evoke trust, organization commitment, and even citizenship. In return, malasakit (concern for the company) is given by employees in return for what is perceived as genuine concern and care by their leaders. These essential leadership actions that enable the HBC model to work, can be described as follows: Lead by Doing. Leading by doing is deemed to be important, and Dr. Hortaleza described how she does this in HBC: “Una, nandoon ako sa store. Umiiikot ako sa store e. In a week, dati talagang three stores in a week pumupunta ako tsaka binibisita ko iyan e (First, I am in the stores. I go around the stores. In a week, I used to go to and visit three stores in a week)” (Hortaleza 2014). Implicit in this example is the Filipino value of hiya (propriety)—almost like saying, “If a CEO cares about the company enough to do this, shouldn’t we care as much?” Personal Touch. In HBC, the concept of personal touch means using a leader’s personal qualities to endear him or her to the employees as a way to encourage, motivate, or develop them. Fabian described how Dr. Hortaleza is able to do this: “I think it’s the motherly figure in her, that she would always want her people to see na (that), ‘O, I’m more than your chairman, I’m the mother of the company . . .’” (Fabian 2014). Dumlao described his own style of doing this: “Nakikita ko yung (I am able to see the) development. Until umabot siya ng (it reaches) 100. And then pag (when) 100 na siya (is reached), ‘O, very good ha! Naayos mo siya ha (You were able to fix it, huh). Kaya lang ayusin natin yung iba pa (But let us fix the others).’ Ganoon (That’s it), visibility is very important” (Dumlao 2014). Execution-Supportive Organizational Values. HBC leaders consider organizational values as crucial in making sure employees execute their assigned tasks, while at the same time fostering relationships and encouraging retention. Fabian, for example, cited the family atmosphere as well as a sense of nationalism: “What is striking when you go inside HBC is talaga yung (really the) familial feeling. I think even people going outside na, they would still go back na, ‘Alam mo, iba talaga diyan (You know, it’s really different there).’ And (the) sense of nationalism…

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in a sense, we’ll always be very proud that it’s Filipino-made, o kaya (or at least) Filipino-initiated” (Fabian 2014). From the above, it is clear how HBC’s leaders have been able to deliberately create an execution culture—the kind of culture that would ensure good corporate performance.

SUMMARY This chapter highlighted both theories and examples of the role of leadership in OD, with the leader as key in initiating and sustaining change initiatives. The cases above featured Filipino leaders and their organizations with specific problems or concerns. Some of these concerns involved helping people cope with and embrace major changes (e.g., the cases of Dr. Alip and Fr. Nebres), whereas others involved initiating and sustaining changes in all levels of management. Still, others involved maintaining a stable organizational identity amidst these changes (e.g., the cases of Fr. Nebres and the Hortalezas from HBC Inc.). Common to these leaders was the ability to inspire others and move them towards a shared vision of the organizations. It was also evident that these leaders took a systemic approach and diagnosed their situation before taking action. They displayed a sensitivity to their context, people, and processes in managing change. This ranged from an awareness of the situation of the poor (e.g., the case with Dr. Alip and CARD), to an awareness of confronting a more globalized world (e.g., the case of Fr. Nebres and the Ateneo), to the familial approach of a leader in relating to followers as rooted in intrinsic Filipino values (e.g. the case of HBC). All in all, these cases show that Philippine organizations have thrived through leadership that demonstrated a sincere understanding of their people and the organization as a whole, took a systematic and holistic approach, and displayed a sensitivity to context, process, and people.

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