August 11, 2003	Monday	Jumadi-us-Sani 12, 1424

Reportedly, Pakistan’s government and national industry are moving at snail’s pace towards social compliance related to labour, health and hygiene, and environment.

Social compliance will be required essentially by January 2005 when some of the WTO agreements will take effect (Dawn, 3.8.03).

Responsibility of businesses towards their stakeholders is an essential requirement of doing business on a sustainable business. This is not merely textbook theory but practice of successful business organizations that have engulfed the world by first being highly responsible corporate citizens domestically, some deviations at the national and international levels notwithstanding. The stakeholders include all the suppliers of inputs and recipients of firm’s outputs directly or indirectly and internal or external to the firm’s legal boundaries.

According to the open systems theory, since a firm receives inputs from the external environment, it owes a responsibility also to those in its external environment. Also, the quality of its inputs from the external environment will be as good or as bad as the returns that a firm provides to the external input providers. A satisfaction-contribution equilibrium, ala Herbert Simon, is to be maintained with all external actors as well so as to improve company performance.

While modern management tries to draw attention towards external environment, we in Pakistan have yet to brave challenges within the internal environment, for example, that of labour as also reported above and known otherwise too. If satisfaction-contribution equilibrium remains disturbed with labour within the internal environment, disequilibria will prevail and it will be difficult to compete both nationally and internationally. For, can an organization be run single-handedly by the entrepreneur or by the owner manager or by any top management for that matter?

Clearly, if they could do it by themselves, they would do so. That labour is to be employed and deployed shows that organizational management is a combined effort. If, in this collective effort, the employees are not given their due share in financial returns and decision-making, there will emerge a dissatisfaction-lack of contribution situation that the above referred news item brings out and that is also generally known to all observers of the ground situation from close quarters. The situation is grave enough to the extent that the issues of labour and health and hygiene are posed as “social” issues to evoke a sympathetic response when, actually, it is an essential requirement of doing business. The downside of this appeal is that many tend to dismiss “social issues” as issues in philanthropy which is not an essential requirement of doing business even though being fair and equitous to those who turn the wheel of the industry is no social welfare project but an essential component of sound and professional business administration.

Unfortunately, it is also believed in some circles that the principles of labour and human resource management taught in Pakistan’s business schools are too fancy a stuff for application in our environment where the labour is “illiterate or uneducated or not educated enough.” It is said that they unionize and become a pain. So, should they first be given good education after which human resource management principles would become applicable? If this be true, how is it that despite their poor state of education, they keep contributing to the GDP, exports, and individual wealth? Certainly, better education would enhance their productivity but they still are a resource alright if they are contributing as above.

Since they are human, they are a human resource which needs to be worked with professionally on the basis of principles embodied in what is now known as human resource management. Where in the world are university graduates employed on the shop floors? Perhaps in some LDCs that cannot create jobs. They may be high school grads or dropouts but they unionize all the same and throw up some very powerful unions that can even influence the course of the industry not just in their own country but elsewhere too. That there are no labour unions in some EPZs and thereby lower costs in some LDCs is an objection first raised by powerful unions in the US. They demanded a level playing field between the developed and the developing countries’ producers by expecting of the latter to play according to the same rules of doing business that are followed in the West.

Otherwise, the LDCs would have an unfair competitive advantage in terms of lower labour costs as all the responsibility towards the labour is not discharged. This is notwithstanding the child labour and bonded labour controversy. Many of these objections came from the developed countries’ unions. Despite powerful unions whose power is still substantial even after the neo-conservative counterrevolution that aimed at stripping the unions down to size, their organizations grow nationally as well as internationally. Across the national frontiers, these organizations attract the best talents in all cadres not just because they share a greater portion of their earnings with the human resource they employ, they also provide a healthy and conducive work environment in which talents are allowed to grow and flourish.

This is notwithstanding the critique of MNCs for promoting dualism and inhibiting growth of domestic industry. At their individual level, they provide a breeding ground for human resource potential. The more enduring of such organizations view their human resource more as investment in appreciable assets rather than as costs and least of all as a case in social welfare which if not attended to for business reasons may be viewed sympathetically for philanthropic reasons. The matter has come to this pass mainly because of the meaning of business as understood in various parts of the world.

While business should operate profitably, it fulfils a broader purpose in the society which is why it is viewed as a living organism albeit with a reversible life cycle so as to be sustainable. It is when business is understood as mere short-term profitability or profiteering as an end in itself that there is a cost-minimization focus with all input providers. The issue of labour, health and hygiene, is then thrown up through a social appeal instead of as an essential part of basic and professional business management and administration.

It is unfortunate that the importance of this key resource, that comes with its brains even though only the hands may be paid for ala one enlightened Pakistani entrepreneur, is yet to be widely appreciated at a time when the country has no option but to make a transition to a liberalized international trade environment, however unfair this trade regime may be for the late developers. Difficulty in compliance with labour standards is being voiced at a time when the world has moved on to also appreciate the role of external actors in company performance.

Herbert Simon, in the 1940s, espoused that even suppliers and customers are members of an organization in addition to employees and entrepreneurs. He thus alerted the world to the importance of the role of external players who are now a lot more in number and also include lenders, interest groups, community, the society at large, and the planet earth. Stakeholders also include the employees and the unions or other representative bodies, as discussed above. Herbert Simon’s theory of extra-organizational relations was the new wave in the business world by the 1960s when striking a fit between the internal and the external environment would be the new business paradigm that would later evolve into strategic management.

It is because of a skeptical view of the state-of-the-art in management that the issue of natural environment is bearing down heavily on us. This too is viewed by some as a fancy requirement that the players in LDCs can ill afford. Making it a part of quality requirements by the international trade regime is almost like giving voice to the silent sufferers of pollution from the tanneries and other industrial/commercial activity. Pollution should be controlled primarily to avert the human suffering within own society and secondarily to gain legitimacy in international markets, if we act with an eye on the open systems theory and if we internalize the concepts of strategic management. That is, to enter into a win-win relationship with own stakeholders for sustainably good and goal-directed business performance. This, by no means, means that we do not know enough in management.

It only means that we must strive to continuously improve which is embodied in the Japanese concept of Kaizen and which the rest of the developed world learnt even though they were sufficiently developed. Hallmark of successful organizations in the developed West is openness that promotes a spirit of enquiry.

Successful organizations take pride in being learning organizations all the time and all the way through. When they come across new ideas and concepts, they do not say, “Oh, do you think we do not know our job?” Rather, open-mindedly and curiously, they like to know how much the new ideas may help them do their job better—-whether the new ideas are from another continent or another country or another cadre of employees from within the organization.

There is a tight leash on organizational ego so as to improve further so as to excel and in a bid to be the best of the best. If the goal is clear and noble, then new ideas are least threatening. In fact, they are most welcome and the organization gears up to ferret out new ideas even from within the organization. Business giants of the world take pride in the number of suggestions they receive for continuous improvement and measure their impact on business performance. The issue boils down to attitudes that are developmental.

A million dollar question in our society is whether we should strive to reshape the development-resistant variety of attitudes that abound. And, who is to take the lead? It is usually the academia that leads in new directions by attempting to synchronize the motion of all societal components so that they may enter into a virtuous cycle of growth and development. As for the business issues in the country, the onus is on the business schools of the country. Information on WTO’s requirements should have been first disseminated widely by this segment. Business schools should be providing guiding light or should be illuminating further failing which they would be held responsible for reinforcing the traits they should have actually changed by now. For, leadership is not just about going up a ladder. As said wisely, leadership is about first determining whether the ladder is leaning against the right wall.