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Outline of a turnaround plan

Thursday, April 19, 2018

A report card for a successful T&T economic recovery should read like this: “Through ongoing fiscal consolidation and active debt management, the public debt to GDP ratio is on a firm downward path.

Macroeconomic stability is entrenched, inflation is well anchored, the current account deficit continues to reduce, foreign exchange reserves are being rebuilt and supply side reforms are improving the business environment. Because of the foregoing, the country is returning to a sustainable growth path”.

T&T’s report card is a long way from this. To achieve this outcome requires a series of steps collectively called a turnaround plan. First, is the diagnosis stage where the causes or underlying problem(s) are identified. The second is to take the emergency action required in the short run. The third stage is the crisis stabilisation phase when specific measures to bring the key variables under control are deployed. The fourth stage entails a wider set of policies, to embed the changes to achieve a sustainable result, in keeping with the longer-term goals. This process should have started in 2015.

Within each stage there are discrete steps, some of which will continue though all stages of the plan. Two such steps are, first, a risk assessment of what could go wrong. Secondly, the mitigation devices needed to reduce the impact of any measure which may have unpleasant consequences.

Since, all economic change affects people, the communication component is continuous as stakeholders need to understand how they will be affected. Any process requires their acquiescence, if not grudging support.

Nobody likes unpleasant surprises and we are sceptical of change. We understand that change is inevitable, but new realities especially those increasing cost or service reductions, require co-operation and forbearance, however lukewarm; honey always tastes better than vinegar.

It also requires trust, never easily given. But countries, like organisations, either change or become dysfunctional. The outcomes must be identified, explained and buy-in obtained (Petrotrin?). People need to understand what the results will mean to their lives.

Indeed, communication is the one element which must be consistently maintained throughout a turnaround process. All affected will want to know what has been achieved to date and the journey’s duration.

Leaders need to give more than hope and excuses; they need to provide evidence that the measures adopted are having the desired effect. And if they are not having the desired result, what else needs to be done.

Change involves people, processes and technology. One cannot keep doing the same things and expect a different result. Business must be done more efficiently and more productively. That means new ways of doing things to achieve better outcomes. In some cases, this will require new investment, as distinct from expenditure control/reduction. Some areas may require expenditure-control, that is, getting a bigger bang for the same buck.

To facilitate decisions that appear to be in conflict, priorities must be set and parameters which will allow comparisons and rankings to be assigned. Difficult decisions must be made, and the element of individual judgment or bias will be reduced if there is a framework. For example, mandating departments to simply cut expenses by seven per cent across the board will fail because it does not recognise nuances or priorities.

People with the relevant competencies to execute these arrangements must be recruited. One starts with the available people resources, but it requires a guiding or practised hand to spot and smooth the people blockages that will occur. In life nothing is static. Management (ministerial?) changes will be needed periodically if the northbound train is to be kept on track and at the right speed. You cannot claim success by avoiding tough decisions.

Above all, it will require a scorecard; objective measures by which the performance of the entities can be evaluated, not spin doctoring. The key to astute management is simple: if you cannot or do not measure, how will you know that the objectives are being achieved or that you are progressing?

For example, how do we know that the health care system is performing better than it used to, or performing at all? It is not to be measured by the size of the budget, or how many hospitals built, but by the number patients treated, backlogs reduced and at a sensible cost. Similarly, is our national security system improving? Is it made better because salaries are increased, or new equipment acquired? Is the education system on a successful path?

The UNC administration was bemused by the sharp drop in energy prices. But, they did address the gas shortages by agreeing fiscal incentives to facilitate new drilling activity. Any claim that the economy has since rebounded is cynical, due only to increased gas production resulting from these incentives and improved energy prices.

The deeper issues remain; the expenditure pattern is not sustainable; the tax framework needs to be recalibrated; the management of state enterprises and the provision of public goods must be brought into the 21st century; and productivity, the only sustainable source of wealth, improved. How are these matters being addressed?

This requires patient, disciplined, consistent effort and above all, leadership and management.


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