Successful Asian family firms are founded and built by extraordinary people -- indeed, often some of the most interesting business players in the region.
Having had the privilege to interact with and interview a number of them, and having studied quite a few more, I have seen that they share a number of characteristics.
Asian family firm chairmen -- they are almost all male -- are typically extremely entrepreneurial, visionary and courageous. Usually, they come from modest backgrounds and experienced hardships or crises early in life that shaped their outlook on risk taking.
Starting out modestly, they frequently said “yes” to opportunities that others shunned. The more they succeeded, the more confidence they gained.
They have usually tried various businesses -- failing in some while being extremely successful with others -- and as a result, built a diversified group of enterprises.
These “superman” founders possess a truly outstanding intuition for “what will work” without being able to articulate why. Almost without exception, they are opportunistic, action-driven and pragmatic, taking all decisions personally as they grow their businesses.
TRUST ISSUES
But as much as I admire them, I have also noted over the years that they tend to have a blind spot: they fail to grasp the quality of their sons as successors.
It is rare to come across a chairman who has full confidence in a child in line to succeed him. Even if they do not directly say so, their actions towards their sons speak volumes.
(Daughter-successors, it should be said, are rare. But the few cases I came across seem to follow the same pattern.)
Supermen (or Superwomen) are not born every day, and the chances of a founder’s children mirroring his unique qualities are slim. Rarely are children younger copies of successful founders.
Yet, the superman-chairman expects nothing less and is deeply disturbed if a son does not match his extraordinary entrepreneurial flair.
Sometimes, this lack of trust in an heir becomes a self-fulfilling prophecy: by hovering over their sons and not believing in them, these chairmen unconsciously create the very conditions for their sons’ failure.
Moreover, they also generate a lot of avoidable tension in the firm and the family.
However, looking for a superman-junior may not make business sense. If the founder has done a great job building a business empire, it is likely that the most effective successor who can bring this Asian family business group to the next level of professionalism is a person with rather different qualities.
Many of the most successful Asian family empires are strong in terms of hands-on leadership, but weak on systems and middle management quality.
Indeed, these business groups seem too far stretched and too haphazardly built to survive beyond their extraordinary founder.
When I visit some of these firms, I cannot help but notice how the senior management run after the chairman on a daily basis, without being able to develop long-term priorities or consistent policies.
Most members of the “lucky sperm club” -- to borrow a term from Warren Buffet -- intuitively know that reliance on a superman-founder for each and every decision is not going to make their business last for generations.
What these founder-dependent empires need is not another superman, but a leader who can transform their own great entrepreneurship into a great legacy through solid governance systems -- in short, someone who can stabilize the group and give it strategic direction.
Indeed, what is needed at this stage may be the very opposite of a business wrapped around a super-leader: it is a super-business that can survive without an outstanding leader.
Who would be best qualified to lead such a transformation from a personalized business towards a long-lasting legacy?
Most likely, it would be someone who can credibly hold a team of competent top-managers together, and who can command respect from banks, partners, employees and authorities, while also keeping the entrepreneurial spirit alive.
What a superman should wish for is someone who can enshrine the chairman’s values in the business, and turn it into a long-lasting legacy, without actually having to take all decisions personally.
In summary, the perfect heir is not necessarily a younger copy of the founder.
Rather, the founder of a successful family group should judge their offspring not by their own unique and rare characteristics, but think about what the business really needs going forward.
While it is of course possible that a son is unsuited for the firm, a chairman must apply the correct metrics.
By taking a broader angle on the future of the business, it might become apparent that perhaps that not-so-very-entrepreneurial son is the perfect choice after all.
In fact, when looking for what the business needs, it may be wise to cast the net wider: would, perhaps, a capable daughter, nephew, or trusted outsider be most suited to bring the family business to the next level of professionalism?
This blind spot can be avoided with a careful look in the mirror from multiple angles.
Doing so will prevent avoidable friction and go a long way towards a long-lasting legacy of excellence.
Marleen Dieleman is Associate Professor of Strategy and Policy at the National University of Singapore Business School, which runs the Asian Family Business Programme in November 2015. More details are available at execed.nus.edu/family-business. This piece is the last in a series of five insights from the school for Asian family businesses looking to grow without losing control.
source: Businessworld
Saturday, October 17, 2015
The impact of consumer-driven human resources
Over the past decade, there has been a growing trend among global organizations to treat their employees as internal consumers. The most innovative of these companies have gone a step further by embracing the concept of “consumer-driven human resources (HR)” -- that is, a mind-set and an operating philosophy that acknowledge and respond to the increasing variety of work-related choices available to employees.
This approach has significant potential for impact on the design and administration of total rewards programs, thus influencing the work and careers of total rewards professionals around the world.
Companies adopting the characteristics of consumer-driven HR recognize that employees today have a broader level of information and choice in many areas, including a greater range of career options, a wider array of employers from which to choose, and more flexible programs offered by specific employers (with more features selectable by employees).
These expanded choices have in turn made corporate life a more efficient marketplace for its increasingly savvy employee-consumers. The roots of this shift in program design actually go back to the 1980s, when companies introduced choice-based programs, such as flexible benefits and cafeteria-style plans.
Today’s employees are more mobile, educated, technologically enabled and short-term-focused than ever. They also have become informed consumers of their organizations’ brands, culture, and compensation, benefits, and career development programs. And with the first Generation Z employees entering the workforce, companies can expect that the preferences and expectations of their employee populations will continue to change, becoming more personalized and more sophisticated along the way.
In response to this emerging consumer-employee, leading companies have turned to consumer marketing theory to gain insights about -- and connect with -- their current and potential talent. Just as companies are using technology and Big Data to direct products and services to ever more carefully targeted segments of customers, organizations are starting to understand the different segments of their varied workforces, including what motivates them and what elements of the employee value proposition they value most.
The 2014 Global Workforce Study conducted by Towers Watson reports that 70% of employees believe their organization should understand them to the same degree that they are expected to understand external customers. Yet only 43% of employees report having an employer that understands them in this way.
A central tenet of marketing theory suggests that not all customers want the same things. The corollary is that not all customers are equally important to the company. Both concepts also apply to the market for employees. Companies that take a “consumer-driven HR” approach use consumer marketing principles to define and understand employee groups by what they need and by their contributions to the success of the business.
For example, the most innovative companies: (1) segment the employee market. Innovative organizations begin by defining employee segments in ways that extend beyond classic demographic groupings.
Effective segmentation criteria leave generous room for creativity in exploring the values, attitudes, preferences and relative contributions of the employee population. Most organizations begin by collecting information from standard demographic and generational categories, but more relevant segmentation variables emerge, including strategically critical roles or locations, actual and potential performance levels, engagement levels, life stage segments, and attitudinal categories.
These data provide organizations with additional information and insight beyond what can be derived from conventional segmentation approaches.
(2) Measure how employees value rewards elements. After segmenting the employee population, companies can test rewards elements to determine which have the highest perceived value to particular employee groups.
The objective is to understand and define the value proposition with the greatest appeal to each group.
Consumer-products companies do the same thing when they conduct sophisticated market research to understand how their target segments will respond to the features and price of a proposed offering. This research can take a number of forms, including focus groups, data mining, employee surveys, and trade-off analysis (which presents employees with scenarios to determine what they view are the most and least valuable components of their rewards package).
(3)Analyze the financial and behavioral implications of rewards. Once companies understand what employees value (market researchers call these utility preferences), the information can be translated into guidance for determining rewards that the organization can deliver. Program design hinges on the relationship between what employees value (and the resulting behaviors, like commitment and engagement, that these programs encourage) and the cost to provide a specific array of rewards.
The ultimate goal is for the company to identify ways to fund more desirable rewards, by shifting investment away from less desirable rewards areas (those with lower perceived value relative to cost).
Organizations that embrace consumer-driven HR have learned that by understanding and acting on employee needs and preferences, they are more likely to have motivated and committed work forces, even with total rewards budgets that are no greater in aggregate than the investments of their peers. Their employees will be more engaged, serve customers better, innovate more frequently and consistently, and protect company assets more conscientiously.
Experience with organizations that have performed the return on investment analysis demonstrates that superior financial results become part of the equation as well.
Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, financial and risk management. For more information, please write to Leah Denoga at leah.denoga@towerswatson.com, call 902-0731 or visit www.towerswatson.com/philippines.
source: Businessworld
This approach has significant potential for impact on the design and administration of total rewards programs, thus influencing the work and careers of total rewards professionals around the world.
Companies adopting the characteristics of consumer-driven HR recognize that employees today have a broader level of information and choice in many areas, including a greater range of career options, a wider array of employers from which to choose, and more flexible programs offered by specific employers (with more features selectable by employees).
These expanded choices have in turn made corporate life a more efficient marketplace for its increasingly savvy employee-consumers. The roots of this shift in program design actually go back to the 1980s, when companies introduced choice-based programs, such as flexible benefits and cafeteria-style plans.
Today’s employees are more mobile, educated, technologically enabled and short-term-focused than ever. They also have become informed consumers of their organizations’ brands, culture, and compensation, benefits, and career development programs. And with the first Generation Z employees entering the workforce, companies can expect that the preferences and expectations of their employee populations will continue to change, becoming more personalized and more sophisticated along the way.
In response to this emerging consumer-employee, leading companies have turned to consumer marketing theory to gain insights about -- and connect with -- their current and potential talent. Just as companies are using technology and Big Data to direct products and services to ever more carefully targeted segments of customers, organizations are starting to understand the different segments of their varied workforces, including what motivates them and what elements of the employee value proposition they value most.
The 2014 Global Workforce Study conducted by Towers Watson reports that 70% of employees believe their organization should understand them to the same degree that they are expected to understand external customers. Yet only 43% of employees report having an employer that understands them in this way.
A central tenet of marketing theory suggests that not all customers want the same things. The corollary is that not all customers are equally important to the company. Both concepts also apply to the market for employees. Companies that take a “consumer-driven HR” approach use consumer marketing principles to define and understand employee groups by what they need and by their contributions to the success of the business.
For example, the most innovative companies: (1) segment the employee market. Innovative organizations begin by defining employee segments in ways that extend beyond classic demographic groupings.
Effective segmentation criteria leave generous room for creativity in exploring the values, attitudes, preferences and relative contributions of the employee population. Most organizations begin by collecting information from standard demographic and generational categories, but more relevant segmentation variables emerge, including strategically critical roles or locations, actual and potential performance levels, engagement levels, life stage segments, and attitudinal categories.
These data provide organizations with additional information and insight beyond what can be derived from conventional segmentation approaches.
(2) Measure how employees value rewards elements. After segmenting the employee population, companies can test rewards elements to determine which have the highest perceived value to particular employee groups.
The objective is to understand and define the value proposition with the greatest appeal to each group.
Consumer-products companies do the same thing when they conduct sophisticated market research to understand how their target segments will respond to the features and price of a proposed offering. This research can take a number of forms, including focus groups, data mining, employee surveys, and trade-off analysis (which presents employees with scenarios to determine what they view are the most and least valuable components of their rewards package).
(3)Analyze the financial and behavioral implications of rewards. Once companies understand what employees value (market researchers call these utility preferences), the information can be translated into guidance for determining rewards that the organization can deliver. Program design hinges on the relationship between what employees value (and the resulting behaviors, like commitment and engagement, that these programs encourage) and the cost to provide a specific array of rewards.
The ultimate goal is for the company to identify ways to fund more desirable rewards, by shifting investment away from less desirable rewards areas (those with lower perceived value relative to cost).
Organizations that embrace consumer-driven HR have learned that by understanding and acting on employee needs and preferences, they are more likely to have motivated and committed work forces, even with total rewards budgets that are no greater in aggregate than the investments of their peers. Their employees will be more engaged, serve customers better, innovate more frequently and consistently, and protect company assets more conscientiously.
Experience with organizations that have performed the return on investment analysis demonstrates that superior financial results become part of the equation as well.
Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, financial and risk management. For more information, please write to Leah Denoga at leah.denoga@towerswatson.com, call 902-0731 or visit www.towerswatson.com/philippines.
source: Businessworld
Wednesday, October 14, 2015
Indonesia’s 10-to-1 rule may block FDI
FOR companies worried about a new Indonesian law requiring 10 locals to be hired for every foreigner, the government has a workaround: stock up on drivers and “office boys” to make tea.
“There is no need to be afraid,” Ruwiyono Septy Priharso, head of the work permit section at the manpower ministry, told an audience of mostly foreign business people at a seminar on the rules. He suggested the quota could be filled by low-paid staff like office boys, a term that refers to mostly young men employed to do routine tasks.
“They do not need to be permanent workers, but it is better if they are.”
The rules, first unveiled in July, are undermining appeals by President Joko Widodo for foreign direct investment (FDI) to help lift an economy growing at the slowest pace since 2009. The president, who has promised to cut red tape and is courting China to build infrastructure, may be facing a pushback by trade unions worried about rising unemployment in the world’s fourth-most populous nation.
The manpower regulations also require non-resident foreign company directors to obtain a work permit, a process that can take weeks and needs to be done within the country. International staff now need to get business visas in advance to attend internal meetings in Indonesia, do training, or for emergency jobs such as fixing machinery.
One stage in the visa process requires applicants to conduct a Skype interview with manpower officials. Mr. Priharso acknowledged that technical issues and a lack of staff were making this process difficult, causing a backlog.
“The latest regulations contradict the claims that Indonesia wants to create an FDI environment that is more attractive than its Southeast Asia neighbors,” said Chris Wren, the executive director of the British Chamber of Commerce in Indonesia. “Some members are already planning to host regional meetings in Singapore rather than Indonesia.
Some UK businesses that were considering Indonesia as a regional hub are having a re-think.”
The rules follow a series of other protectionist measures and policy u-turns this year. Trade Minister Tom Lembong, a former private equity manager who has reversed some policies since his appointment in August, said the restrictions on foreigner permits and local worker quotas is “a big problem” being created by bureaucrats.
“For every one expat worker who comes in, that person creates between three and 12 jobs,” Mr. Lembong said in an interview last month. “You have to understand this is not coming from the president.”
The backlash against foreign workers has come despite a shrinking number in the country. Out of a total work force of more than 100 million, there were 54,000 registered foreigners as of August this year, down about 30% from 2012, according to the manpower ministry. The largest group, numbering 13,000, are from China, it said.
Mr. Widodo is looking to increase Chinese investment to build railways, power stations and dams, and local media have expressed concerns about an “invasion” of foreign labor.
“The central government looks at the economy, but regional governments need to protect the jobs on their patch,” said Said Iqbal, president of the Indonesian Trade Union Confederation. “These rules are the only ones able to prevent the Chinese from coming in droves.
They are a threat to Indonesian workers.”
Around 43,000 workers in Indonesia lost their jobs between January and September after cuts by industries such as garments, footwear, electronics and coal, the Bisnis Indonesia newspaper reported, citing Haiyani Rumondang, a director general at the manpower ministry. -- Bloomberg
“There is no need to be afraid,” Ruwiyono Septy Priharso, head of the work permit section at the manpower ministry, told an audience of mostly foreign business people at a seminar on the rules. He suggested the quota could be filled by low-paid staff like office boys, a term that refers to mostly young men employed to do routine tasks.
“They do not need to be permanent workers, but it is better if they are.”
The rules, first unveiled in July, are undermining appeals by President Joko Widodo for foreign direct investment (FDI) to help lift an economy growing at the slowest pace since 2009. The president, who has promised to cut red tape and is courting China to build infrastructure, may be facing a pushback by trade unions worried about rising unemployment in the world’s fourth-most populous nation.
The manpower regulations also require non-resident foreign company directors to obtain a work permit, a process that can take weeks and needs to be done within the country. International staff now need to get business visas in advance to attend internal meetings in Indonesia, do training, or for emergency jobs such as fixing machinery.
One stage in the visa process requires applicants to conduct a Skype interview with manpower officials. Mr. Priharso acknowledged that technical issues and a lack of staff were making this process difficult, causing a backlog.
“The latest regulations contradict the claims that Indonesia wants to create an FDI environment that is more attractive than its Southeast Asia neighbors,” said Chris Wren, the executive director of the British Chamber of Commerce in Indonesia. “Some members are already planning to host regional meetings in Singapore rather than Indonesia.
Some UK businesses that were considering Indonesia as a regional hub are having a re-think.”
The rules follow a series of other protectionist measures and policy u-turns this year. Trade Minister Tom Lembong, a former private equity manager who has reversed some policies since his appointment in August, said the restrictions on foreigner permits and local worker quotas is “a big problem” being created by bureaucrats.
“For every one expat worker who comes in, that person creates between three and 12 jobs,” Mr. Lembong said in an interview last month. “You have to understand this is not coming from the president.”
The backlash against foreign workers has come despite a shrinking number in the country. Out of a total work force of more than 100 million, there were 54,000 registered foreigners as of August this year, down about 30% from 2012, according to the manpower ministry. The largest group, numbering 13,000, are from China, it said.
Mr. Widodo is looking to increase Chinese investment to build railways, power stations and dams, and local media have expressed concerns about an “invasion” of foreign labor.
“The central government looks at the economy, but regional governments need to protect the jobs on their patch,” said Said Iqbal, president of the Indonesian Trade Union Confederation. “These rules are the only ones able to prevent the Chinese from coming in droves.
They are a threat to Indonesian workers.”
Around 43,000 workers in Indonesia lost their jobs between January and September after cuts by industries such as garments, footwear, electronics and coal, the Bisnis Indonesia newspaper reported, citing Haiyani Rumondang, a director general at the manpower ministry. -- Bloomberg
Managers: Wise men or fools?
Two weeks ago, I had the pleasure of listening to Dr. Roseann Tan-Mansukhani, a faculty member of the De La Salle University (DLSU) Psychology Department, who talked about her study titled, “Wise persons in the community: Their actions, social interactions and roles” in a multidisciplinary research dissemination conference organized by the University Research and Coordination Office of DLSU. Tan-Mansukhani is one of the few individuals doing wisdom research in the Philippines.
In her research, which she undertook in a community in Ilocos Norte, she asked community members to nominate individuals whom they considered to be wise persons, and to describe their experiences as beneficiaries of the wise actions of these individuals.
Tan-Mansukhani said that these wise persons typically assumed influential roles in the community.
Aside from being the go-to persons for advice and other forms of assistance (“takbuhan ng bayan”), the wise persons also serve as a “mirror that reflects back” to other people what they can aspire to achieve -- that they, too, can be wise individuals.
It is not only the individual with whom the wise person interacts who benefits from the latter’s wisdom. The community also benefits in terms of being more cohesive (“mas buo ang barangay”). On top of being perceived as rational individuals, wise persons are valued for their emotional and social/interpersonal skills. They also exhibit virtuous lives in varying degrees, Tan-Mansukhani said.
Given that wisdom is seen as a desirable human trait, I wonder why this concept is not more commonly tackled in the discourse of business and management. Being wise is not given as much value as being more productive, making more money, or moving up the corporate ladder.
For managers of most businesses, it’s all about delivering results and achieving the financial bottom line, sometimes at the expense of the well-being of employees and other organization stakeholders.
In his book What Were They Thinking?: Unconventional Wisdom about Management, renowned management scholar Jeffrey Pfeffer talks about “feedback effects,” which managers often fail to consider when making decisions -- to the detriment of their organizations. When companies encounter financial difficulties, for example, those who run the business would usually bring down labor costs either by laying off people or by cutting wages and benefits.
While this managerial decision immediately brings down expenses, it could have unintended consequences that are bad for the company in the long run.
First, cutting salaries and benefits drives people to leave. And those who are most likely to find jobs elsewhere are the most talented people, whose skills, experience, and insight the company needs to turn the business around.
Second, those who are left behind deal with heavier work loads without additional compensation, creating a desire on their part to either slack off or to sabotage the company.
Obviously, these contribute to worse organizational performance and make it more difficult for the company to recover from its financial rut.
Wise decisions and actions are also influenced by the structure of organizations.
In many large and bureaucratic organizations, middle managers and frontline managers are constrained from exercising their judgment in many instances due to centralized decision-making, excessive controls, and inflexible rules. They are expected to simply follow predetermined criteria and standard procedures contained in thick, detailed manuals that are compiled to anticipate every conceivable circumstance to minimize mistakes in decision-making.
Those who are courageous (or who care) enough to raise questions or to challenge existing practices are seen as troublemakers by those in higher positions and as “fools” by colleagues who know that “rocking the boat” could get in the way of moving up the corporate ladder. This situation does not only discourage creative thinking and innovation among employees but also prevents the company from developing a new generation of managers who are reflective, able to handle uncertainty, open to contrary ideas, trustworthy, and truly wise.
Raymund B. Habaradas is an Associate Professor at the Management and Organization Department of De La Salle University, where he teaches Management of Organizations and Management Research. He is also the Director of the Center for Business Research and Development.
rbhabaradas@yahoo.com
source: Businessworld
In her research, which she undertook in a community in Ilocos Norte, she asked community members to nominate individuals whom they considered to be wise persons, and to describe their experiences as beneficiaries of the wise actions of these individuals.
Tan-Mansukhani said that these wise persons typically assumed influential roles in the community.
Aside from being the go-to persons for advice and other forms of assistance (“takbuhan ng bayan”), the wise persons also serve as a “mirror that reflects back” to other people what they can aspire to achieve -- that they, too, can be wise individuals.
It is not only the individual with whom the wise person interacts who benefits from the latter’s wisdom. The community also benefits in terms of being more cohesive (“mas buo ang barangay”). On top of being perceived as rational individuals, wise persons are valued for their emotional and social/interpersonal skills. They also exhibit virtuous lives in varying degrees, Tan-Mansukhani said.
Given that wisdom is seen as a desirable human trait, I wonder why this concept is not more commonly tackled in the discourse of business and management. Being wise is not given as much value as being more productive, making more money, or moving up the corporate ladder.
For managers of most businesses, it’s all about delivering results and achieving the financial bottom line, sometimes at the expense of the well-being of employees and other organization stakeholders.
In his book What Were They Thinking?: Unconventional Wisdom about Management, renowned management scholar Jeffrey Pfeffer talks about “feedback effects,” which managers often fail to consider when making decisions -- to the detriment of their organizations. When companies encounter financial difficulties, for example, those who run the business would usually bring down labor costs either by laying off people or by cutting wages and benefits.
While this managerial decision immediately brings down expenses, it could have unintended consequences that are bad for the company in the long run.
First, cutting salaries and benefits drives people to leave. And those who are most likely to find jobs elsewhere are the most talented people, whose skills, experience, and insight the company needs to turn the business around.
Second, those who are left behind deal with heavier work loads without additional compensation, creating a desire on their part to either slack off or to sabotage the company.
Obviously, these contribute to worse organizational performance and make it more difficult for the company to recover from its financial rut.
Wise decisions and actions are also influenced by the structure of organizations.
In many large and bureaucratic organizations, middle managers and frontline managers are constrained from exercising their judgment in many instances due to centralized decision-making, excessive controls, and inflexible rules. They are expected to simply follow predetermined criteria and standard procedures contained in thick, detailed manuals that are compiled to anticipate every conceivable circumstance to minimize mistakes in decision-making.
Those who are courageous (or who care) enough to raise questions or to challenge existing practices are seen as troublemakers by those in higher positions and as “fools” by colleagues who know that “rocking the boat” could get in the way of moving up the corporate ladder. This situation does not only discourage creative thinking and innovation among employees but also prevents the company from developing a new generation of managers who are reflective, able to handle uncertainty, open to contrary ideas, trustworthy, and truly wise.
Raymund B. Habaradas is an Associate Professor at the Management and Organization Department of De La Salle University, where he teaches Management of Organizations and Management Research. He is also the Director of the Center for Business Research and Development.
rbhabaradas@yahoo.com
source: Businessworld
Tuesday, September 8, 2015
Legal procedures for job termination due to disease
In cases of termination due to just or authorized causes, the employer must comply with procedural due process.
For just causes of termination of employment under Article 288 of the Labor Code, procedural due process comprises of the twin-notice rule: a notice to apprise the employee of the ground for which his dismissal is sought and a notice informing the employee of his dismissal, issued to him after being given reasonable opportunity to be heard.
For authorized causes of termination under Article 289, due process consists of notices furnished to the Department of Labor and Employment (DoLE) and the employee 30 days prior to the effective date of termination.
However, Article 290 (previously Article 284), or terminations due to disease, presents curious case for procedural due process requirements.
While jurisprudence has consistently regarded Article 290 as an authorized cause for termination, the Supreme Court, in Deoferio v. Intel Technology Philippines, Inc. (GR No. 202996, June 18, 2014) has mandated that the twin-notice requirement for just causes of termination likewise applies to cases of termination due to disease.
Article 290 allows an employer to terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees upon payment of the required separation pay. A competent public health authority must certify that the disease is of such nature that it cannot be cured within a period of six months even with proper medical treatment.
The observations of the Supreme Court in Deoferio are apt in that the Labor Code and its Implementing Rules and Regulations are, indeed, silent on the procedural due process required in terminations due to disease.
The Supreme Court ruled in Deoferio that because an employee should be afforded procedural due process in all cases of dismissal, the failure of the company to furnish the employee the twin-notice rule entitled the latter to nominal damages for a violation of his right to procedural due process. The Supreme Court held that the Court of Appeals gravely abused its discretion when it ruled that the twin-notice requirement does not apply to terminations due to disease, as a conclusion that is unsupported by law and jurisprudence.
However, contrary to such pronouncement, an earlier en banc ruling of the Supreme Court in Agabon v. National Labor Relations Commission (GR No. 158653, 17 November 2004) explicitly stated that if the separation is based on authorized causes, due process is complied with by the giving of a 30-day notice to the employee and the DoLE. Deoferio appears to reject this ruling and insists instead on the application of the twin-notice requirement to terminations under Article 290.
If one considers the rationale for terminations due to just cause and authorized cause, the difference in the procedural due process requirements becomes evident. Since just causes termination deal with a violation by the employee, apprising him of the ground for his termination and affording him the opportunity to be heard allows the employer to establish by its own evidence its case for dismissing the employee.
For authorized causes, the law acknowledges that certain business exigencies allow termination of employment.
In only requiring a 30-day prior notice, the law impliedly recognizes the requirement of complying with the twin-notice rule and an opportunity to be heard as superfluous since the management has already determined a certain business exigency that necessitates separation of employees.
With the foregoing premises in mind, requiring an employer to comply with the twin-notice rule for terminations due to disease proves to be problematic.
First, the certification of a public health authority regarding the nature of the disease already renders redundant the process of furnishing the employee the twin-notice and an opportunity to be heard. The certification of a public health authority should already suffice to establish the existence of the disease that cannot be cured within a six-month period, even with proper medical treatment.
Second, the written explanation of the employee and the conduct of an administrative hearing raise some questions. How does an employer require an employee to prove his health? Conversely, how will an employee raise his defenses against a certification of a competent public health authority as to the nature of his disease? Must the employee produce his own medical evaluation and certification? If so, how can the employer weigh the defenses raised by the employee against such certification?
Finally, requiring compliance with the twin-notice rule for separation due to disease, distorts the distinction between terminations due to just and authorized cause.
Deoferio itself recognizes that terminations due to disease do not entail any wrongdoing on the part of the employee. However, in requiring compliance with the twin-notice rule, the Supreme Court effectively requires a process that is meant to prove the said “wrongdoing” as opposed to a termination due to the business exigency or the necessity of having a ready, willing, and able employee to perform work for his employer, without any prejudice to his health or to the health of his co-employees.
Considering the foregoing, the ruling in Deoferio may need further clarification. Perhaps, the Supreme Court, in another case, and especially considering the concerns raised above, may take the opportunity to clarify its ruling in Deoferio, especially in light of the ruling in Agabon.
Franchesca Abigail C. Gesmundo is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
830-8000
fcgesmundo@accralaw.com
For just causes of termination of employment under Article 288 of the Labor Code, procedural due process comprises of the twin-notice rule: a notice to apprise the employee of the ground for which his dismissal is sought and a notice informing the employee of his dismissal, issued to him after being given reasonable opportunity to be heard.
For authorized causes of termination under Article 289, due process consists of notices furnished to the Department of Labor and Employment (DoLE) and the employee 30 days prior to the effective date of termination.
However, Article 290 (previously Article 284), or terminations due to disease, presents curious case for procedural due process requirements.
While jurisprudence has consistently regarded Article 290 as an authorized cause for termination, the Supreme Court, in Deoferio v. Intel Technology Philippines, Inc. (GR No. 202996, June 18, 2014) has mandated that the twin-notice requirement for just causes of termination likewise applies to cases of termination due to disease.
Article 290 allows an employer to terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees upon payment of the required separation pay. A competent public health authority must certify that the disease is of such nature that it cannot be cured within a period of six months even with proper medical treatment.
The observations of the Supreme Court in Deoferio are apt in that the Labor Code and its Implementing Rules and Regulations are, indeed, silent on the procedural due process required in terminations due to disease.
The Supreme Court ruled in Deoferio that because an employee should be afforded procedural due process in all cases of dismissal, the failure of the company to furnish the employee the twin-notice rule entitled the latter to nominal damages for a violation of his right to procedural due process. The Supreme Court held that the Court of Appeals gravely abused its discretion when it ruled that the twin-notice requirement does not apply to terminations due to disease, as a conclusion that is unsupported by law and jurisprudence.
However, contrary to such pronouncement, an earlier en banc ruling of the Supreme Court in Agabon v. National Labor Relations Commission (GR No. 158653, 17 November 2004) explicitly stated that if the separation is based on authorized causes, due process is complied with by the giving of a 30-day notice to the employee and the DoLE. Deoferio appears to reject this ruling and insists instead on the application of the twin-notice requirement to terminations under Article 290.
If one considers the rationale for terminations due to just cause and authorized cause, the difference in the procedural due process requirements becomes evident. Since just causes termination deal with a violation by the employee, apprising him of the ground for his termination and affording him the opportunity to be heard allows the employer to establish by its own evidence its case for dismissing the employee.
For authorized causes, the law acknowledges that certain business exigencies allow termination of employment.
In only requiring a 30-day prior notice, the law impliedly recognizes the requirement of complying with the twin-notice rule and an opportunity to be heard as superfluous since the management has already determined a certain business exigency that necessitates separation of employees.
With the foregoing premises in mind, requiring an employer to comply with the twin-notice rule for terminations due to disease proves to be problematic.
First, the certification of a public health authority regarding the nature of the disease already renders redundant the process of furnishing the employee the twin-notice and an opportunity to be heard. The certification of a public health authority should already suffice to establish the existence of the disease that cannot be cured within a six-month period, even with proper medical treatment.
Second, the written explanation of the employee and the conduct of an administrative hearing raise some questions. How does an employer require an employee to prove his health? Conversely, how will an employee raise his defenses against a certification of a competent public health authority as to the nature of his disease? Must the employee produce his own medical evaluation and certification? If so, how can the employer weigh the defenses raised by the employee against such certification?
Finally, requiring compliance with the twin-notice rule for separation due to disease, distorts the distinction between terminations due to just and authorized cause.
Deoferio itself recognizes that terminations due to disease do not entail any wrongdoing on the part of the employee. However, in requiring compliance with the twin-notice rule, the Supreme Court effectively requires a process that is meant to prove the said “wrongdoing” as opposed to a termination due to the business exigency or the necessity of having a ready, willing, and able employee to perform work for his employer, without any prejudice to his health or to the health of his co-employees.
Considering the foregoing, the ruling in Deoferio may need further clarification. Perhaps, the Supreme Court, in another case, and especially considering the concerns raised above, may take the opportunity to clarify its ruling in Deoferio, especially in light of the ruling in Agabon.
Franchesca Abigail C. Gesmundo is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
830-8000
fcgesmundo@accralaw.com
source: Businessworld
Tuesday, August 18, 2015
Lawful termination of employee’s services
Dear PAO,
My supervisor told me and my two co-employees that we will be terminated on or before October this year because our services will no longer be needed since the company is about to purchase machines that will do the exact services that we are rendering. I just want to know if this can be legally done to us. What benefits will we get assuming they really push through with our termination?
Dawn
My supervisor told me and my two co-employees that we will be terminated on or before October this year because our services will no longer be needed since the company is about to purchase machines that will do the exact services that we are rendering. I just want to know if this can be legally done to us. What benefits will we get assuming they really push through with our termination?
Dawn
Dear Dawn,
Not all terminations of employees are considered unlawful or illegal. Our laws have enumerated the just and authorized causes for which an employer may validly terminate the services of an employee and these are specifically mentioned under Articles 282, 283 and 284 of Presidential Decree 442, as amended, or the Labor Code of the Philippines.
Not all terminations of employees are considered unlawful or illegal. Our laws have enumerated the just and authorized causes for which an employer may validly terminate the services of an employee and these are specifically mentioned under Articles 282, 283 and 284 of Presidential Decree 442, as amended, or the Labor Code of the Philippines.
In the situation that you have presented, we believe that the applicable legal provision is Article 283 of the code. As provided therein, “The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, x x x” (Emphasis supplied)
Nevertheless, it is necessary that such termination be done by your employer with due process. As stated under Section 2, Paragraph 3, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, the requirement of due process is complied with upon the service by the employer of a written notice to the employee as well as the appropriate Regional Office of the Department of Labor and Employment (DOLE) at least thirty (30) days before the effectivity of the termination, specifying therein the ground/s for such termination.
Supposing your employer proceeds with your termination, in compliance with the above-mentioned tenets, you are entitled to receive a separation pay that is equivalent to at least your one (1) month pay or to at least one (1) month pay for every year of your service, whichever is higher. (Article 283, Id.) You may also claim your unpaid salaries, if there are any, as well as your 13th month pay, which shall be in proportion to the length of time you worked for this year, reckoned from the time you started this year up to the time of your termination. You may also demand such other benefits expressly granted under your contract of employment or collective bargaining agreement, should there be any.
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net
Tuesday, August 11, 2015
555 contracting vs project employment
A TEMPORARY worker came to me last week to plead for his continued employment as he grappled with the end of his five-month contract. He told me he’s willing to sign a contract promising that he will not file any legal claim for regular employment if his services are retained for two years. What’s the best approach to this? -- Bewildered to Death
It’s flattering and at the same time puzzling to hear from a temp who may not have other options but to be continuously attracted to your organization. For management who were born yesterday, the suggestion is usually tempting, until you realize that it can be a dangerous legal trap.
With the little knowledge that I know about the law, you and the temp cannot simply commit in writing any agreement that would circumvent the Labor Code and its pertinent rules that were created to protect the interests of workers. Even a bar flunker will readily tell you that labor standards and social legislations were established to give protection to those who have less in life.
Here’s what I suspect. Some enterprising labor lawyer may have prodded your temp to test your being naïve or foolish. Every day, some contingent workers may have not much to do that they dream of assuming a regular post in your organization.
On top of that, many of them work so hard that you think they deserve recognition. The trouble is that if you ignore their basic aspirations, they will do whatever is possible, if not do stupid things like offer such an illegal waiver promising not to file a legal complaint against management.
Then you look at your manpower plan, which looks rather empty for another regular job. In fact, you’re now in the midst of outsourcing many of your internal processes to external service providers. But sometimes, this approach is wrong, when you think of its many advantages, including the unwitting leak of trade secrets to another company that could be your potential competitor.
Sooner than you think, you will encounter all kinds of problems and your neck will be a little over the dirty quicksand, prior to the company’s bankruptcy. And at that point, you will wish that you hadn’t said yes to outsourcing.
This is a fast becoming problem among organizations that rely much on temps and outsourcing companies, so that contractual workers outnumber the regular work force by as much as 70%.
And so, what’s the better option? Instead, I’d like to suggest that you offer project employment. It’s much better than giving 555 contracts, which are demeaning to some workers. With project employment, you can define the task, the work standards, and the period of employment, which can last from one to three years.
I’ve been hearing a lot of good things about project employment from many of my well-meaning friends in the human resources profession.
I’m passing this information to you. Just the same, allow me to make this disclaimer: I’m not a lawyer.
That’s why it’s better for you to consult your lawyer. Ask him to compare the advantages of project employment with the hiring of people from a manpower agency, or even from a cooperative. When I say a lawyer, choose someone who has the heart and mind for the poorest of the poor and not just anyone who would give you false expectations and mistaken confidence that they can win the battle in any court of justice.
Remember, it’s you who will pay for the cost of a protracted legal battle. This is not to mention the time and effort that you could spend elsewhere. This is the lesson of a businessman-friend who opted to hire and maintain a former union lawyer, now a reformed person after leading a botched strike in one bank, resulting in job loss for hundreds of union members.
Framed this way, you should also look at the ethical side of running a business. Figure out how to earn reasonable profit with honor. Create the best work environment for all workers and give them decent jobs in the process.
Go ahead and explore a better option for the concerned temp. If he’s good and has the potential to succeed, offer him a regular job in the organization, if not project employment for the two years he’s offering. Agree on a mutually-acceptable work standard, timeline, and target.
Coach him to do his best and not let a manpower agency do the thinking for your business. Hiring temps may be good for some time.
The goodness is temporary, but the evil things become permanent when management do it without fail.
elbonomics@gmail.com
source: Businessworld
It’s flattering and at the same time puzzling to hear from a temp who may not have other options but to be continuously attracted to your organization. For management who were born yesterday, the suggestion is usually tempting, until you realize that it can be a dangerous legal trap.
With the little knowledge that I know about the law, you and the temp cannot simply commit in writing any agreement that would circumvent the Labor Code and its pertinent rules that were created to protect the interests of workers. Even a bar flunker will readily tell you that labor standards and social legislations were established to give protection to those who have less in life.
Here’s what I suspect. Some enterprising labor lawyer may have prodded your temp to test your being naïve or foolish. Every day, some contingent workers may have not much to do that they dream of assuming a regular post in your organization.
On top of that, many of them work so hard that you think they deserve recognition. The trouble is that if you ignore their basic aspirations, they will do whatever is possible, if not do stupid things like offer such an illegal waiver promising not to file a legal complaint against management.
Then you look at your manpower plan, which looks rather empty for another regular job. In fact, you’re now in the midst of outsourcing many of your internal processes to external service providers. But sometimes, this approach is wrong, when you think of its many advantages, including the unwitting leak of trade secrets to another company that could be your potential competitor.
Sooner than you think, you will encounter all kinds of problems and your neck will be a little over the dirty quicksand, prior to the company’s bankruptcy. And at that point, you will wish that you hadn’t said yes to outsourcing.
This is a fast becoming problem among organizations that rely much on temps and outsourcing companies, so that contractual workers outnumber the regular work force by as much as 70%.
And so, what’s the better option? Instead, I’d like to suggest that you offer project employment. It’s much better than giving 555 contracts, which are demeaning to some workers. With project employment, you can define the task, the work standards, and the period of employment, which can last from one to three years.
I’ve been hearing a lot of good things about project employment from many of my well-meaning friends in the human resources profession.
I’m passing this information to you. Just the same, allow me to make this disclaimer: I’m not a lawyer.
That’s why it’s better for you to consult your lawyer. Ask him to compare the advantages of project employment with the hiring of people from a manpower agency, or even from a cooperative. When I say a lawyer, choose someone who has the heart and mind for the poorest of the poor and not just anyone who would give you false expectations and mistaken confidence that they can win the battle in any court of justice.
Remember, it’s you who will pay for the cost of a protracted legal battle. This is not to mention the time and effort that you could spend elsewhere. This is the lesson of a businessman-friend who opted to hire and maintain a former union lawyer, now a reformed person after leading a botched strike in one bank, resulting in job loss for hundreds of union members.
Framed this way, you should also look at the ethical side of running a business. Figure out how to earn reasonable profit with honor. Create the best work environment for all workers and give them decent jobs in the process.
Go ahead and explore a better option for the concerned temp. If he’s good and has the potential to succeed, offer him a regular job in the organization, if not project employment for the two years he’s offering. Agree on a mutually-acceptable work standard, timeline, and target.
Coach him to do his best and not let a manpower agency do the thinking for your business. Hiring temps may be good for some time.
The goodness is temporary, but the evil things become permanent when management do it without fail.
elbonomics@gmail.com
source: Businessworld
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