The Crime had Victims

There is not enough money in the national treasury to properly fund critical social programs. Programs which, if funded, actually save a few people from death. Not theoretical death...actual "no more breathing", "buried in the cold hard ground" death. And those programs save a lot more people from suffering in general. The convicted former president stole some of the money from that already inadequate supply. The fact that he was convicted means that you no longer have to say "alleged" when talking about the crimes. He really did steal public funds.

If you dug deep enough, how many people would you find that actually died, or at least experienced greater suffering, as a result of the theft? And how many of those same people, or their survivors, still see Estrada as their hero, totally unaware of how his theft caused their suffering?

There are many "victimless" crimes in the world. This was not one of them.

Corruption: Taking Responsibility

Corporate Responsibility

In its World Development Report 2005, the World Bank reported that more than half the companies in the Philippines had to bribe regulators just to get things done. In this context, "getting things done" refers to routine administrative processes like getting utilities connected, passing inspections, or securing permits from local government offices.

In survey after survey, both local and foreign companies continue to describe corruption as a serious roadblock to doing business in the Philippines. They also report that bribes consume a significant percentage of their total sales. Everyone seems happy to respond to these surveys, apparently thinking that if we talk about it enough maybe something will change. But what do the individual companies actually do about the the problem?

While most companies reject corruption in principle, very few have posted regulations that specifically prohibit corrupt acts. Many publish mission statements or company policies which address the issue, but these are rarely anything more than broad statements of philosophy. While demands for large under-the-table payoffs probably always get attention from senior executives, I doubt whether most CEO's are aware of the myriad of smaller demands that are handled routinely by their staff. Sometimes this is because they don't see, and sometimes because they don't want to see.

In day-to-day operations, company clerks and accountants routinely pay "fees", "consideration", and "for the boys" money to various local government offices or officials, to facilitate company needs. These payments are almost never demanded, but they are always expected, and junior company clerks often find themselves caught in the middle. A government official implies that a "fee" is required, and the employee knows that management needs the service in question. The employee knows the fee is not official, but also knows that the company tolerates the practice as a necessary evil. In most cases, the employee doesn't even feel the need to ask for guidance. It's just SOP.

This system has evolved into something way beyond extortion. Threats are almost never issued, or even implied. In fact, the whole process is more or less automatic. A new employee, unaware of the need for payment, may even be reminded by his co-workers, lest he forget to appease the official and risk some unspoken retribution against the company. A new accountant may ask "how much?", but never "why?" It's just SOP.

Without internal guidelines specifically prohibiting these acts, the employees that actually make a company run will continue to support corrupt behavior, even when it contradicts the company's declared anti-corruption "philosophy". Companies serious about resisting corruption must make their policy crystal-clear to employees, by issuing a regulation strictly prohibiting these payments. Employees need this clarity to give them the confidence to resist the overtures of corrupt city officials, and there should be no mixed signals from the top. By "mixed signals" I mean the company must not continue to unofficially tolerate the practice while posting a regulation that prohibits it. In that case, the safest thing for the employee to do is to quietly keep playing the game. All we've accomplished then is a little more paperwork.

The wording of an anti-corruption regulation is really pretty simple, and should not be hard for any law-abiding company to adopt:

· "It is prohibited for any company employee to make any payment to any government official or office, except published fees as prescribed by law."

· "It is prohibited to make any payment to any government official or office in cash."

· "All checks issued to any government office must be made payable to the institution that provided service. No check for such services may be issued in the name of any individual."

· "No payment may be made to any government office unless an official receipt is issued."

Any company can implement this regulation, which is really just a reinforcement of its commitment to obey the law. Obviously though, a single company making a lone stand may find itself on the losing end against corrupt government officials. Services may be refused or delayed, inspections may be failed, or permits denied. Corrupt officials hold considerable power.

But there is also strength in numbers, and a unified front can succeed where a lone resister could not. Business associations such as the Makati Business Club and the various Chambers of Commerce are perfect vehicles for coordinating simultaneous implementation among their members. The boycott aspect is a "make or break" element, and if enough companies suddenly start refusing to go along with the demand for under-the-table payments, the system will be forced to change.

As an odd kind of example, consider what has happened with airline hijackings since 9/11. After the heroic passenger uprising aboard Flight 93, and a few other celebrated incidents, we seem to have discovered that, if passengers simply refuse to cooperate, hijackers lose their power to take control. In the 3 years since that tragedy, I don't believe there has been a major hijacking anywhere in the world. The power of group resistance.

Finally, at the same time as these companies jointly implement the anti-corruption regulation, it would be helpful to hear a clear and public statement of support from local mayors and city councils. In many cases, bribes and extortion are wrapped within seemingly harmless acts of appreciation, tips, and gift-giving, and are often seen by all concerned as "just the way we do things". A public statement from a government official, worded as clearly as the regulation I just described, will carry weight even if it comes from a corrupt bureaucrat who has no wish to see the current system change.

Corporate policies and public statements are certainly not the cure-all for the kind of corruption described by the World Bank report, but they will definitely be a huge step in the right direction. Any problem must be defined before it can be attacked, and then the act must be specifically prohibited before it can be realistically defeated.

Reporting Corruption

As I said at the beginning, everybody seems delighted to answer surveys about corruption, and to complain about how much it hurts business, but there is a question I haven't yet seen on any survey: How many of the companies who complained of extortion in a survey actually reported the experience to the authorities?

Over the years, I have talked with many local and foreign businessmen in the Philippines, and almost every one has related some experience with under-the-table payoffs. Most were low-level payments to facilitate permits and the like, and a few talked about extortion at much higher levels, but for all the coffee-shop complaining, I have yet to meet anyone who has filed a report or an official complaint about extortion. In fairness, I do occasionally see newspaper reports of these complaints, but they represent a drop in the bucket compared to the "half the companies in the Philippines" mentioned in the surveys. Yes it's true that government doesn't do a very good job of telling people where or how to report corruption, and it's certainly true that exposing a demand for extortion may jeopardize the project, but it's also true that each of these companies have a legal responsibility to report criminal acts. The situation is infinitely more complicated than that, but it is important to understand that blind surveys do not trigger investigations or lead to arrests. Government must make a greater effort to educate individuals and businesses about their options for reporting corruption, and must instill confidence by demonstrating that complaints will be acted upon quickly. But the environment will not change unless official complaints are filed with the authorities.

In my view, this is the real meaning of "Corporate Responsibility".

Petty Cash Funds: Discretion Run Wild

Government petty cash funds are a perfect example of uncontrolled discretion. Not in the fact that they exist, but in they way they are managed. By definition, "petty cash" is a small amount of money intended for minor, unexpected expenses. The office printer suddenly runs out of ink, and there is no more in the supply cabinet. Sometimes these things happen, no matter how carefully a budget is planned. So the office manager issues a few hundred pesos from petty cash, properly logged of course, and someone runs to the store. After making the purchase he turns in the receipt, and that money is now accounted for. This is how petty cash works in most private businesses, and even in many governments. And no matter how big the company, the amount of money in any petty cash fund would never be more than a few thousand pesos at one time. There should not be many unexpected expenses, and those that do arise should be small. More expensive needs, even for emergencies, must still go through the formal purchase request process. The idea is that managers should plan for their needs with a carefully thought out budget.

In the Philippines however, many government offices maintain very large petty cash accounts, sometimes on the scale of several hundred thousand pesos. Expenditures from the fund are often documented by a certification signed by the official, rather than with receipts. There is no proof, other than the official's word, as to how the money was spent. Once again we see the "shield of honor" being invoked to ward off any accusations of corruption. But while we really do wish we could accept the word of those "honorable" officials, let's not forget the 1/5 of the national budget that "evaporates" every year. Misuse of petty cash funds is one of the cracks through which that money disappears.

This situation is simply not acceptable. To say that an office needs to keep 200,000 pesos available for emergency purchases is nothing but an excuse for poor fiscal planning. And not requiring a receipt for every expenditure is an almost overwhelming invitation for corruption. I suspect that millions of pesos, at the very least, are lost and stolen every year through the combined petty cash funds of the Philippine Government, high and low. This is one of the incredibly simple steps that government can take to immediately gain control over its money. Again, strictly regulating the size and use of petty cash funds, and requiring official receipts for every purchase, should not be seen as a sign of mistrust. Every private company does it. It's just good accounting.

Discretion: An Invitation To Corruption

One of the main causes of corruption is the excessive degree of discretion afforded to government officials, coupled with a nearly non-existent level of true accountability. In simple terms, "discretion" means having the authority to decide how money is spent. Some countries limit discretion by implementing very detailed budgets, and extremely clear regulations on how funds may be used. The more regulatory control a government exercises over its funds, the less corruption it experiences. "Accountability" is synonymous with "responsibility". It simply means that a government official who has control over a certain fund is responsible for either properly spending that money or returning it to the National Treasury. The word "accountability" also carries an implied consequence for failure. If a government official fails to properly control money for which he is accountable, there must be a consequence. Corruption-watchers use an embarrassingly simple equation to describe this concept:

DISCRETION - ACCOUNTABILITY = CORRUPTION

The beauty of this formula lies in the fact that it not only describes the problem, but also gives the solution:

LESS DISCRETION + MORE ACCOUNTABILITY = LESS CORRUPTION

The answer to the problem of corruption, in the Philippines or any other country, is simply a matter of reducing the discretion that government officials have to spend money, assess fees, and award contracts, and increasing accountability by holding those officials responsible for every peso under their control. There are basic procedures, used by governments and private businesses around the world, that force people to account for the money they control. Simple things, like requiring a receipt for every purchase, or tightly controlling cash advances. Countries that practice this sort of fiscal accountability do not experience the level of corruption seen in the Philippines. But enforcing these procedures requires challenging the assertion that government officials are inherently honest and that their word is the only verification necessary. This philosophy has been the shield behind which many dishonorable people have taken refuge over the years.

Because it is such a powerful force in daily interactions, and because it often overrides written procedure, the "shield of honor" serves to effectively cancel out any effort to enforce accountability. This is part of the self-sustaining nature of corruption in the Philippines. Any leader who tries to challenge the shield of honor is said to be lacking in delicadeza, and thus is considered arrogant and dishonorable himself.

This brings us back to something I said previously -- the phrase "political will", that is tossed around so often as both an excuse and an accusation, really means nothing more than "just do it". Any government official who says "I can't control corruption in my department" is actually saying "I'm not willing to do what is necessary to control it". No one has to wait for a new law to be passed before they can start fighting corruption in their own area of responsibility. Any government official, at any level, can implement a local policy requiring his people to submit receipts. This is what I mean by "just do it." And while we are on the subject of "willing", it must be clearly understood that it is absolutely not possible for a government official to spend money illegally or to award a contract in violation of government guidelines unless someone at a higher level allows it, either by specific action or by intentional inaction. That decision-making power, free from oversight from above, or in collusion with those above, is the discretion I am referring to.

When we talk about discretion we're not only describing one person's ability to make decisions without supervisory approval or oversight. We're also talking about decision-making groups that create the illusion of a working checks and balances system. Such a group might include only two or three people, such as a taxpayer, tax-collector, and the auditor who checks the work, or it might include an entire city council. It's even possible that a decision-making group might include the entire chain of a national government department, as well as the auditors from a completely separate agency. All it really takes is an agreement to work together in committing a corrupt act.

Whenever government officials are accused of corruption, they often respond by saying that they could not possibly have done anything illegal since their actions were approved at various levels, and that checks and balances within the system would have detected any irregularities. Government itself frequently makes this same assertion, in an effort to deflect arguments that it is not effective in controlling corruption. In reality, if all members of a decision-making group are in collusion, corruption is not only easy, it is also nearly risk-free. And in an environment where corruption brings very little risk and very high reward, coupled with a general belief that there is really nothing wrong with it, it becomes very easy to co-opt the entire group. This is a direct result of the informal way that government operates, as I described before. One of the reasons that procedures and regulations exist is to prevent just this kind of problem.

Of course, some discretion will always be necessary, to allow government to respond to situational changes, but for now that flexibility is far less important than the need to control corruption. All government processes can be charted to determine where discretion is necessary, and where it should be prohibited. This should not be seen as an indication of mistrust. It is simple accountability. Anyone entrusted with the responsibility of handling someone else's money should be able to accept this, whether he is a clerk or a congressman.

Cashless Operations: Part II

In a previous article I discussed the idea of requiring all government transactions to be conducted by check or bank deposit, as a "corruption-proofing" measure. Well, I have a little more to say on the subject.

Government is currently involved in an all out drive to raise new revenue through new taxes. At first glance that doesn't seem like a bad idea. But additional revenue simply won't make any difference in solving this country's problems, and I'll tell you why. The National Treasury "bucket" is full of holes. But these are no ordinary holes. The amount of money that leaks out through these holes, meaning the amount stolen through graft and corruption, is not a fixed number like other expenses. The amount stolen is actually always a percentage of whatever is available. This means that no matter how much more we collect, more will be stolen. And the leakage is not small. The Philippine Center for Investigative Journalism is reporting today that up to 70% of local health funds are stolen by corrupt government officials. Not 5% or even 20% like the Mafia might take, but 70%! It's a wonder there is any money left after everyone gets their cut.

This tells us that there is very little, if any, control over the handling of government money. Sure, we have a whole book full of rules and regulations, but they are simply not enforced. The Finance secretary just reported that government will be filing new cases against corrupt BIR and Customs officials each week. But filing cases depends on catching those people. We'll certainly catch some, and it's important to prosecute them quickly, but those will really only be a drop in the bucket. The system is just too well entrenched, and too many people are involved, to be stopped by a few arrests. What we really have to do is gain physical control over the money itself. We may not be able to force people to be honest, but it is possible to make it very hard for them to hide the money they steal.

The way to do that, as I said before, is simply to STOP USING CASH! One of the suppliers of medicines to a local government, quoted in the PCIJ report, said it very clearly. "Mayors prefer cash, since checks leave a trail." Well, there you go! The bad guys avoid checks like a thief avoids the light. So why don't we shine a little light on the money trail and see where it leads?

Prohibiting the use of cash is one of the easiest moves government can make, and the very minor administrative costs would immediately be offset by the incredible gains in financial control. I suspect that the Department of Finance can probably implement such a policy without need for any new laws. Just advise all government units, at all levels, that from now on, funds will only be disbursed through bank transfers to each unit's official bank account. And then advise each of those units that the only way funds may be disbursed is by check. In fact, any government unit or office can already implement such a procedure within its own jurisdiction. The Armed Forces could do it, a city government could do it...we don't have to wait to be told.

This procedure certainly won't stop corruption, but it will definitely make it harder to get away with it. As a matter of fact, if we actually enforce it, we might even be able to reverse the numbers on corruption pretty quickly. How about 30% stolen and 70% actually used to buy medicines and health care? Not the end of the fight, but a definite improvement. And I believe it's very, very possible.

Cashless Operations: An Anti-Corruption Strategy

Government collects money for a variety of purposes, including tax and customs payments, fees for services, and fines and penalties for various violations. In reality though, a very large part of that money never makes it to the National Treasury. Sometimes the amount received is intentionally misdeclared, while in other cases money collected by a government official is not reported at all. In addition, money that is not part of the official payment is often given to expedite the service, bypass red tape, or to reduce the total amount owed. This "under the table" payment, of course, goes straight into the collector's pocket.

Many of these payments to government are made in cash. But despite official receipts and documentation, only two people really know how much was actually collected -- the citizen who made the payment and the government employee who received it. Even with an audit, it is difficult to verify that the amount declared on the receipt is the amount which actually changed hands. If a citizen pays the tax-collector a 30,000 peso bribe to reduce his overall income tax by 70,000, it will most likely not be discovered. If a traffic violator pays 200 pesos to a policeman to avoid a 2,000 peso fine, it will definitely not be discovered. This situation exists because payments are made in cash, and because that cash is given directly to individual government employees.

Government also makes many payments in cash, often in very large amounts. Supplies are purchased, bills are paid, and disbursements are made with cash in envelopes, bags, and briefcases. There is simply no way to track that cash as it moves from one person to another, and in some cases it may not be possible to verify that it was even spent at all. The further down we go on the government ladder, the more common this becomes. The widespread use of cash for government transactions openly invites corruption, and effectively defeats any accountability measures that government could impose. It is therefore critical that we take government offices out of the business of handling cash. The best way to do that is simply to prohibit the use of cash for any government transaction, paid or received.

As an example, take a look at the visa offices at some foreign embassies in Manila. Before their appointment, visa applicants are advised to visit any local bank and pay a fixed amount to a specified account. The bank doesn't need any special forms or equipment to do this. It just takes a straight forward deposit. The applicant then brings the deposit slip to the Embassy and presents it as proof that payment was made. There is no question about how much was paid, and it is not possible for anyone at the embassy to divert the funds. It is still possible for bribery or extortion to occur, but it is now much easier to detect and control. Most payments to government could easily be handled the same way.

Along with direct bank deposits, checks are another form of cashless transaction that can prevent corruption, if they are properly controlled. Checks have a built-in tracking system that can almost guarantee accountability. Every check must be made payable to an official government office, at the highest level possible. For example, a check to pay for a fire safety seminar should be written to the Bureau of Fire Protection rather than to the local Fire Marshal. Payment for a building permit should be made out to the "City of..." rather than to the City Engineer. Documentation prepared by the office that performed the service will record the fact that the fee was paid for a service it provided. Funds can then flow back down from the Treasury, if necessary, to the responsible office. The idea is to send each payment straight to the National Treasury before anyone has a chance to divert it. Absolutely no checks paid to government may be made out in the name or title of an individual. All checks issued to government must be "For Deposit Only" even if they are not marked as such. Encashing a check written to any government office must become a criminal offense, for which both the check-holder and the bank can be held liable. Banks can easily enforce these procedures.

Even the more complicated fees, which require computation and adjustment, can be calculated by the appropriate office and then paid at the bank or by check (again made out to the government rather than to an individual). The important thing is to separate the one who computes the fee from the one who collects it.

Paying taxes by bank deposit or by check is already an option in the Philippines, so let's just take it one step further and make it mandatory. Just compute the tax owed, the same way you do now, and then march off to any local bank to make the deposit. Then attach a copy of the deposit slip to your Income Tax Return. The only people inconvenienced will be the cheaters. And every citizen can be guaranteed that not one peso of his payment will ever find its way into a tax collector's pocket.

This will not prevent connivance between the tax collector and the taxpayer to reduce the amount owed, but it will guarantee that all official payments are deposited entirely into the Treasury. Other measures, which I will discuss later, will address the connivance issue.

Now let's look at payments made by government offices. Except for small petty-cash purchases, every one of those payments must also be issued in the form of a check. Government checks must always be made payable to a person or company by name, never "Pay to Cash". Payment to a company must always be endorsed to the name of the company, never to an individual. All government-issued checks must also be "For Deposit Only". This adds one more check-and-balance layer to the process, making it possible to trace the disbursement of government funds all the way into a registered bank account. The No Cash rule must be required all the way down to the Barangay level. And it must apply in all parts of the country. Every Barangay can open an official checking account. The banks will be more than happy to assist.

The Armed Forces must also implement the No Cash policy across the board, with the possible exception of units in the field. In this case, "in the field" means in areas where no banking facilities exist, and there are actually very few of those areas in the country. Every military post has access to a bank through which it can conduct its financial business. And except in the remote jungle, everyone that the military does business with can deposit a government check with very little difficulty. For salary payments, mandatory direct-deposit payroll accounts must be set up when a soldier enlists, eliminating the need for risky payroll shipments. Soldiers can get their money easily through any Automated Teller Machine in the country. There is no justifiable reason why the AFP cannot conduct almost all of its business by check and bank deposit.

Adopting these measures will not only slash corruption and theft, they will also greatly improve the public's confidence in government, and soon after, the confidence of foreign investors. That value alone will make it worth the effort.

Imposing the No Cash rule on government operations is a simple thing. Much more complicated, but just as necessary, will be to encourage the private sector to adopt the same policy. Compliance would have to be voluntary, but it should not be difficult to convince private companies once they have seen the benefits as demonstrated by government's example.

Corruption-proofing

Prohibiting the use of cash, and requiring all government transactions to be made by bank deposit or check will guarantee a dramatic reduction in the theft of government money almost overnight. Corruption will certainly still exist, but it will be much, much harder to get away with it, because it will be much harder for corrupt officials to physically get their hands on the money.

With cashless operations, there is simply no opportunity for money to be diverted. At the very least, there will be a traceable record of every check and every bank deposit. Transactions that are documented in bank records are transactions that can be taxed.

In addition to the direct benefits, cashless transactions will keep more hard currency in the banks, strengthening the nations banking system. It is a win-win situation. This is a perfect example of the way that a solution to one problem can contribute to the solution to another.

No Receipt - No Pay

Just a quick suggestion. Government would like very much to encourage the use of sales receipts, to force businesses to properly report their income, and by extension, to force them to pay the proper tax on that income.

Whenever I go into a McDonalds or Jollibee restaurant, I see a sign which reads "If we fail to give you a receipt, your order is free". The purpose of this, of course, is to help the store prevent its own employees from stealing money. Why don't we pass a law requiring all businesses, of all types, to implement the same policy? I'm sure that most customers would be happy to take advantage of the chance to get some free merchandise, which would force businesses to offer receipts for their own protection. Some people might say that such a requirement is unfair to the poor businessman, but in truth the only businessman who would be hurt is the one who tries to cheat the system.

As a matter of fact, why don't we apply the same law to government services? If a government office fails to give you a receipt for a service it provided to you, that service must be absolutely free. What a concept!

Just a little idea, but it's one of the nuts and bolts that need tightening in this wonderful country we call the Philippines.

Naming Names

There was an interesting article in today's Philippine Daily Inquirer, on page A22 of the sports section, entitled "A heavyweight secret the Philippines can't afford", by Recah Trinidad. In short, the article reports that an unnamed Filipino rented a luxury suite in the MGM Grand Villa I, at a cost of US$20,000 per night, while attending the recent Morales-Pacquiao prizefight. The author offers several clues to the identity of the big spender but never actually reveals the name. He rules out several well-known wealthy Filipinos, and even says that the guy is "a lot bigger than a congressman", but refuses to name the name, on the grounds that it would be a "political bombshell".

This game of revealing a wrongdoing but refusing to identify the perpetrator is a common practice here, not only by the press, but also by government officials. It's not unusual to hear an elected official publicly, and indignantly, releasing an "expose" in which he reveals ALMOST enough detail to identify an erring official, but refuses to give the name out of "delicadeza". Amazingly, in a country where so many officials abuse the public trust, and where so many suffer as a result of that abuse, we still place a higher value on the need to avoid embarrassing or shaming a guilty party. This is something that must change, or we will never be able to control the massive theft that happens right under our very noses every day. In my opinion, there is something much bigger at stake here than protecting the honor of someone you have already implied to be dishonorable.

But, then again, maybe we really don't want anything to change. Maybe we like the system just the way it is. Anti-corruption consultant Tony Kwok recently suggested that we need to start a shame campaign, to embarrass people into behaving honorably. But his recommendation drew immediate fire from a number of elected officials, who seemed to feel that this practice would violate individual dignity and even human rights. My question is, "whose rights are violated when an official spends $20,000 per night renting a luxury hotel in Las Vegas?" Could it be the thousands of poor and hungry Filipinos who might otherwise have benefited from that money? I think their need far outweighs the needs of delicadeza.

Accountability

The government of the Philippines, like any democratic government, is made up of an entire army of officials, elected, appointed, or hired to manage the country's affairs. Each one is king of his particular hill, and each manages his department as he thinks best. Each tries hard to protect the interests of his department and to make sure that projects within his jurisdiction get the highest priority.

An effective government though, requires that all parts operate with a common purpose. One department may have to sacrifice so that another may complete a function which has a higher priority. Or one office may have to merge its goals with those of another for the greater good. Naturally, and rightfully, the people in charge of those offices and departments would never willingly sacrifice their own interests in favor of another. And so a leader is needed to manage the team and to make decisions that transcend the individual interests of lower level departments. A leader who can enforce laws and policies across the board, without regard for favors or perceived obligations.

Filipino culture recognizes that a favor done requires a favor in return, but in the world of government, this is not only inappropriate, it also runs counter to the good order of the country. The cultural rules that dictate the way people interact in the private world have no place in government.

An effective government should be managed very much like a corporation. The CEO, who is usually elected by the Board of Directors or by the stockholders, is charged with the very important responsibility of appointing qualified people to manage each department. Those managers, and the CEO himself, are then regularly evaluated on their performance and effectiveness. In the corporate world, when a manager fails to perform as required, or botches a critical assignment, the company leadership will usually demote him or fire him. Either way, the manager is held accountable for his performance.

From the company's point of view, this serves two purposes. First, an inadequate performer is removed from an important position and replaced with someone more capable. This eliminates a weak link and keeps the company running at peak efficiency. And second, it sends a clear signal to other managers that there is a consequence for sub-standard performance. The company may be sympathetic to the manager's sense of dignity, but it cannot afford to let that sympathy weaken the organization.

If the manager's failure involves some kind of crime, it may be appropriate to file criminal charges against him. But that is secondary to the company's goal of efficient operations. Leadership is not about gathering evidence and filing cases, and leaders do not always need an airtight legal case before action can be taken. Just replace a bad performer with someone more capable. We do it with junior employees every day.

In the Philippine Government, we often hear very senior officials admitting that they serve at the pleasure of the President, and that they understand they may be relieved at any time. But when they find themselves facing dismissal, we suddenly hear them loudly complaining that the action is "unfair" and that they were not afforded "due process". Effective government, like effective management, cannot operate this way. The benchmark is simple: Was the goal accomplished? If a manager is not performing, government must replace him with someone who can -- immediately.

And if you fire a man because he was not up to the task, it makes no sense to give him a different job to let him save face. A poor performer is a poor performer, no matter where you put him. Moving him to a different position is just asking for failure in another department. This applies at all levels of government.

Supervisors Have To Supervise

The frontline enforcers in any government, and indeed, the ones who have the greatest power to effect change, are the field supervisors. I'm talking here about office managers, shift leaders, OIC's, and all the other people who directly manage the workforce.

A supervisor's role is to make sure the employee knows his job, and that he performs his duties properly. If a traffic cop is not at his post, or is not working aggressively, his supervisor is responsible. If a city inspector is operating so independently that he is able to accept bribes, his supervisor is not supervising. Corruption doesn't usually happen behind closed doors. In all likelihood, the supervisor sitting in the next room knows what's going on and has a responsibility to take action.

A few years ago there was a scene in a movie in which a terrorist kept control of his hostages by threatening "If anyone moves, I will shoot you and the man next to you!" Any hostage who thought his neighbor was about to try something was quick to discourage the act, for fear of suffering the consequences himself. The point is, if you can't motivate the individual to behave responsibly, then motivate those nearby, by holding them accountable for the actions of their coworkers. If a supervisor knows, without a doubt, that he'll be penalized for the poor performance of his subordinates, I guarantee he will watch over their shoulders as they work. Nothing motivates people better than fear of consequences, and if you apply that motivation all the way up and down the chain of command, and demonstrate that you will actually hold people accountable, both for things they have done and for things they know have been done, you may find a working government buried beneath the bureaucracy.

Firmly holding managers responsible for the performance of their subordinates is a critical part of cleaning up the mess in this country. And the very top rung of this leadership ladder is in Malacanang.