CEO Views: Upgrading Standards

CEO Views: Upgrading Standards

Irwin C. Nidea, Jr. sought occasions by which he could express himself.

But as a tax lawyer of one of the four largest accounting firms in the Philippines, his venues for self-expression were limited.

While his job did involve writing, the subjects he covered dealt with matters esoteric and confidential, comprehensible only to him, his colleagues and the firm’s clients, most of which were corporations that felt – rightly or wrongly – entitled to tax refunds from the government.

Last November, after working for more than three years at Punongbayan & Araullo (P&A), Nidea decided to take a break from his daily grind.

Instead of issuing tax opinions and crunching numbers, he attended a writing workshop organized and facilitated by author and newspaper columnist Barbara Gonzales.

Fully funded by the accounting firm, the weekly writing workshop was held for two-and-a-half months for four hours each session. An estimated 20 employees, including the firm’s midlevel managers, participated in the half-day workshop.

Initially, Nidea didn’t think that the program would amount to much.

He was wrong.

During the first meeting, Nidea was already excited by a word-association exercise, stimulating him and other P&A employees to write.

Eight sessions and a number of exercises later, Nidea and his coworkers produced a chockfull of essays, stories and poems.

The tax lawyer, for his part, chose to write “Four Precious Jewels and a Golden Thread,” a poem about the emotional loss he felt as a child everytime his father, an overseas Filipino worker, left his family to pursue his career abroad.

In attending the workshop, Nidea was able to unleash his inner writer, proving that there was more to life than credits and debits, assets and liabilities, top lines and bottom lines.

“I only wanted to become a good lawyer. I wasn’t expecting that I could be more human,” Nidea told the BusinessMirror, referring to the program’s benefits.

Meanwhile, Gonzales, the workshop’s facilitator, was so impressed by the intensity of Nidea’s poem that she included it in her column a few days before Christmas last year.

When Nidea learned that his poem was published, he was taken aback. No one thought that tax advisors such as himself could produce works that could see print.

Despite his initial writing success, Nidea will not be pursuing a different profession anytime soon.

After all, Nidea, like other similarly inclined employees, is encouraged to practice creativity at work by helping produce the company’s internal electronic newsletter, which includes a lampoon issue.

In one way or the other, allowing employees to indulge their interests at the office has helped P&A boost worker retention and loyalty, especially given the global competition for talent.

But by far, besides attractive compensation, P&A’s secret in helping keep employees loyal is in its training programs.

Approximately one-third of its overhead costs are allotted to improve the skills of its employees.

“This includes training inside and outside the office, here and abroad,” Gregorio S. Navarro, P&A managing partner and chief executive, told the BusinessMirror.

Not only has the company covered the dollar-based tuition of three employees currently taking up their Masters in Management at the Asian Institute of Management (AIM), it has also shouldered expenses of its executives enrolled in a yearlong global exchange program spanning three countries – Belgium, the UK, and the US.

“Every year, every member of the staff is trained as much as one-and-a-half to two months,” Navarro said, adding that training covers even clerks, messengers and utility personnel.

Primarily consisting of core business subjects such as tax clinics, a few traini ng programs – as shown by the writing workshop – also encourage right-brain thinking, giving a positive interpretation to the term “creative accounting.”

Customer service

Although it has always encouraged employees to use the right side of their brains, P&A has not lost sight of its goals.

Besides continuing to insist on providing customers with topnotch, world-class service, the accounting firm has also emphasized a clear-cut, no-nonsense professional work ethic designed to enhance employee performance and responsibility.

“The minute we hire someone, right from the very beginning, we emphasize quality work, responsiveness and hard work,” Navarro said, paraphrasing the company motto – integrity, quality, excellence.

These three concepts are not mere buzzwords cited to make the company look good. Nor are they used to pay lip service to certain ambiguous corporate ideals.

To underscore the value of its practice and the importance of its customers, the company has devised and enforced policies regarding office matters both big and small.

Take phone calls and e-mail messages. Any e-mail message received by any P&A employee is required to be answered within the day and no later than two days. If the matter is complicated and needs further consultation, the reply is supposed to indicate a date when the recipient should expect another message.

A similar set of regulations covers phone calls. A phone is to be answered within three rings. If the person being called is unavailable or is otherwise indisposed, s/he should return the call within four hours.

“We tell our clients and the public that our office hours are from 8 to 12, and from 1:30 to 5:30. If you call us, expect us to be there,” Navarro said.

While P&A doesn’t keep tabs on the competition, Navarro admitted that he hears complaints about rivals.

“We want to make sure that we don’t get the same complaints and if we do, we want to address them right away,” Navarro said. “A client will never call you if he doesn’t need you. The reason he calls you is because he needs you and he needs you now.”

This preoccupation with efficiency and excellence has resulted in the creation of a sister unit, a specialty law firm that allows customers to file formal proceedings immediately, if they so require.

“To a very large extent, the battleground in our tax business is responsiveness, the ability to deliver promptly what we promised to deliver, which is exactly one of our philosophies,” said Benjamin R. Punongbayan, chairman and P&A’s founding partner.

To ensure that these promises are never broken, the company has, among others, established a formal mechanism designed to improve employee relationships, be it between supervisors and subordinates or secretaries and janitors.

Since unresolved tensions between coworkers inevitably result in low morale and poor performance, P&A management thought it best to hold a yearly general meeting in which all sorts of questions – professional and personal – are aired and given due attention.

“Although personal issues sometimes come out during these meetings, some of the people who are new to the firm or have come from other companies are amazed that these things could even be discussed,” Navarro said, adding that subjects run the gamut of employee concerns from audit questions to more internal matters.

For his part, Punongbayan said that employees are even permitted to write their questions down during these meetings.

“We make sure that all things are answered, even if questions require a study,” said Punongbayan.

Moreover, if an employee is shy or unable and/or unwilling to raise a sensitive matter during the meeting, s/he can always log on to the P&A Ethics hot line (ethics.pna.ph, a link to which is available on the company& ;rsqu o;s home page) and file an anonymous report.

Available to its personnel, suppliers and customers, the confidential online third-party tool allows an independent entity to “address issues such as fraud, abuse and misconduct in the workplace…strengthen ethical policies, and minimize exposure due to fraud and abuse.”

Upon receiving the report, an external advisor previously authorized by P&A will investigate the incident and is expected to document his findings within seven days.

Although its antifraud initiatives are neither unique nor original, P&A’s ethics hot line is just one of a whole set of mechanisms to ensure that it complies with international standards, accounting or otherwise.

Post-Enron

In 2005 Filipino financial regulators, hoping to prevent a fallout similar to the one spawned by Enron, instituted rules patterned after the International Financial Reporting Standards (IFRS). Currently being used in Europe and very recently adopted by the US Securities and Exchange Commission, the IFRS is a set of principles-based accounting practices that have slowly gained worldwide acceptance.

Expected to assist managers and owners in practicing good corporate governance, the new standards are nevertheless predicated on strict rules that make it more difficult for companies to mislead shareholders regarding their true financial conditions.

As a result, the Philippines’ accounting industry – and by extension, the corporate sector – was daunted by the paradigmatic shift in the adoption of the new rules three years ago.

During this period, P&A took the lead in helping customers and even the competition understand what the whole thing was all about.

P&A, intending to be at the forefront of thought leadership in the industry, issued publications that dealt with the implications of the new standards, the only accounting firm ever to do so at that time, according to Navarro.

“That was part of our advocacy to raise everyone’s standards,” Navarro said, adding that one of its books – Taxation of Financial Institutions in the Philippines – is now being used by the Court of Tax Appeals and the Bureau of Internal Revenue.

P&A has also reached out to smaller accounting firms and to the country’s 110,000 CPAs, most of whom are not SEC-accredited, by inviting them to participate in the company’s training programs.

In January, a month before it celebrated its 20^th year, the P&A Foundation and the Financial Executives Institute of the Philippines launched another book, The Power to Govern.

Given to all business schools for free, the book includes the corporate governance principles of the Organization for Economic Cooperation and Development, a group of 30 countries that believe in the free-market system, and local case studies of companies involved in good and bad business practices.

“For a long time, there has been a dearth of real leadership in the profession. No one has been telling business that complying with new standards is the right thing to do,” Navarro said. “We are challenged to fulfill that role.”

Despite P&A’s efforts, Navarro, in a separate BusinessMirror report, said that many big Filipino companies have yet to comply with new reporting standards. The same report quoted SEC Chairman Fe Barin, who said that “less than 80 percent” of the more than 200 firms in the Philippine Stock Exchange are complying with stricter accounting rules.

But these setbacks have not deterred P&A from continuing its advocacy for good governance. Neither has it weakened its resolve to maintain its integrity and independence.

As a result, the accounting firm’s reputation has preceded and has spoken for itself.

Case in point: before a Japanese mobile-phone operator decided to invest in PLDT, the company hired P&A to un dertak e an independent and objective assessment of the local telecommunications company. P&A has also been selected to undertake due diligence work for many of the Philippines’ biggest privatization projects, including the National Power Corp., Petron, Philippine Airlines, among others.

This has shown that the efforts of P&A to stick to new accounting standards have not been in vain.

“Early this year, we made a declaration that we will do what is right even if the others are doing something that is merely acceptable,” Punongbayan said. “If we believe that our own interpretation of things is more difficult than the others or at a higher level, we will pick the higher level. We may lose business in the short term but our compliance with standards will make us No. 1 eventually.”

(As published in the CEO Views section of the BusinessMirror, 26 February 2008)