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**RESPONDING TO CHANGE IN THE WORKPLACE:**

INNOVATIONS IN LABOR-MANAGEMENT-GOVERNMENT COOPERATION

**The Lapanday Development Corporation (LADC)**

**Labor- Management -- Government Cooperation**

# THE PHILIPPINES

June 25 -- 26, 2001 Mexico City, Mexico

**THE LAPANDAY DEVELOPMENT CORPORATION (LADC)**

**LABOR - MANAGEMENT -- GOVERNMENT COOPERATION**

**PHILIPPINE CASE STUDY**

# 

## THE COMPANY

Lapanday Agricultural and Development Corporation (LADC) is a subsidiary
of Lapanday Foods Corporation (LFC). LADC is considered the flagship
company of LFC because of the economic performance of the former and its
central role to the business of LFC. LADC grows, harvests, packs,
markets and exports fresh Cavendish bananas to Japan. It is a fully
integrated fruit company and a leading producer of world-class fresh
bananas.

LADC's plantations are located in Davao City, Mindanao - the southern
most island of the Philippines. Davao City has a favorable climate for
fruit growing, where fruit trees thrive because of constant temperate
climate, which unlike other places in the Philippines does not alternate
from the dry to the wet seasons. Davao is hardly visited by typhoons.

LADC's banana exports account for 33% of the Philippines's total banana
exports to Japan and provides jobs and livelihood opportunities to
thousands of plantation workers and their families in Davao, in addition
to other workers outside of those in Davao who are involved in
marketing, logistics and port operations requirements.

Its present owners - the Lorenzo family, acquired LADC in 1983 from a
consortium made up of the Javellana, Aboitiz and Ayala families, who had
established the plantation in 1969.

The members of the present generation of the Lorenzo family, which owns
and manages the LFC group of companies, obtained their education from
renowned management schools in the Philippines and the United States of
America (U.S.A.) and were thus prepared to handle the affairs of LFC and
LADC with a high degree of professionalism. They are young and
idealistic. Indicative of the standing of its officials in the
Philippine business community, the chairman and Chief Executive Officer
(CEO) of Lapanday Holdings Corp. - Luis P. Lorenzo, Jr. -- delivered a
talk before an eminent audience of CEOs in the Philippines entitled "The
Lapanday Experience: Lessons and Emerging Thrusts, Repositioning RP
Agriculture for Global Competitiveness" on May 22, 2001.

## THE CHALLENGES

When the Lorenzo family bought LADC, the company faced external and
internal problems due to increasingly serious competition from market
forces and basic company survival problems from within, beginning with
disgruntled workers and supervisors. In its immediate communal
environment, there was no peace and order within the workplace of LADC
and it could not impose discipline on its personnel because it believed
its workers were protected and supported by the dissident Communist
Party of the Philippines / New People's Army (CPP/NPA). The CPP/NPA was
perceived as a organization which shielded workers from management
sanctions by threatening management with retribution if it insisted on
penalizing erring workers. Supervisors were afraid to discipline erring
workers. If they did, they were threatened with bodily harm and some
officers, including a division manager, have been killed.

Its external business environment was, likewise, inhospitable as the
Philippines was then gripped by the destabilizing effects of the
assassination of the late former Senator Benigno Aquino Jr. in August
1983. Investor confidence was low in relation to the domestic market, as
well as with foreign trade because of the unpredictability of both the
economic and political environments. Just like the late former
Philippine president Ferdinand Marcos, who was at that time losing his
grip over a restless Filipino citizenry, the LADC also groped for a
handle on how to turn things around.

The conditions in LADC's plantations and communities reflected the
country's woeful state of affairs. The dissidents used Davao as a
laboratory or a pilot area for urban guerilla warfare. In turn, the rich
plantation owners and the local populace who did not agree with the
dissidents' ideology armed themselves and fought the rebels' intrusion
into their communities. Mr. Aurelio Reginaldo, a former priest and
manager of the LADC was ambushed and killed in view of the struggle and
counter-struggle in the LADC communities.

The company could have but did not seek assistance from the local
government with jurisdiction over the LADC plantations because the
company perceived that the then local leaders were either sympathetic to
the CPP/NPA or were fearful of antagonizing the Party. This was an
obvious handicap for a company that is not just a discrete organization,
but existing as a community.

The company was also initially hesitant to engage its workers' labor
union in constructive relationship because of its perception that since
the workers' organization was affiliated with the *Kilusang Mayo Uno*
(May First Movement*)*, the de facto national labor center of militant
workers in the Philippines, the company felt that it would have
difficulties convincing the union to accept the necessity of making
business and organizational adjustments to respond to the challenges of
globalization and specifically to produce the right products desired by
the market.

The situation of the company gave rise to additional operational and
labor problems. Given their initial negotiating advantages, the workers
pressed their leverages to the hilt and were able to secure the benefit
of receiving a full day's pay for only three hours of work.

The workers, the community and the management eventually also had to
face the burden of having to pay "progressive taxation" -- the
dissidents' version of an income tax, which added to the operational
costs of the enterprise. All of these negative conditions prevailed from
1979 till the early years under the new management. The foregoing
conditions were in fact among the major reasons why the previous owners
gave up on the banana planting business, and placed the challenge of
enabling the company to survive on the Lorenzos, a prominent family from
Davao.

When a new national government leadership assumed power in 1986, the
community took advantage of the euphoria to look for basis of new and
more cooperative and accommodating relationships. The protracted
skirmishes between the government's Armed Forces of the Philippines and
the CPP's New People's Army ended in 1988 after counter groups emerged,
supported by business people and communities, cutting the dissidents'
support line from the civilian population. And soon peace reigned in the
Lapanday valley.

The situation in the immediate environment or the community eventually
found reflection in the attitude of workers within the LADC. Realizing
that their antagonistic relationship with the company was producing a
state of affairs that was leading nowhere, the workers realized that the
company could not survive without them cooperating with the new
management. The workers' union, led by their President Ricardo Villamor,
decided to chart a more independent but cooperative co-existence with
the management and became an independent union, free from the influence
of any labor federation in 1988.

## THE LABOR-MANAGEMENT COOPERATION COUNCIL

In 1989, the amendment to the Labor Code of the Philippines, which dealt
with labor relations policies, placed special emphasis on promoting a
voluntary mechanism to address labor and management concerns in the
workplace through mutually beneficial approaches. The system encouraged
the bi-partite social partners to thresh out and solve their concerns in
a win-win manner, with government merely serving as facilitator in the
relationship. This mechanism is known as the **Labor Management
Cooperation Council (LMCC**). With the assistance of the government
through the Department of Labor and Employment, specifically through the
promotional and facilitative services of the Regional Branch of the
National Conciliation and Mediation Board (NCMB), LADC's labor and
management decided to go along with the experiment. The LMCC was set up
and eventually institutionalized by Management and Labor at LADC in
1989. To ensure that the leadership of the workers would have the
technical competence and capacity to deal with the management in
addressing the many problems bugging the company, the Asian Institute of
Management (AIM) was first invited into the company to teach the parties
problem solving and Labor-Management Cooperation models, and the union
president was later given a scholarship by the company to study the
principles and best practices on labor-management cooperation at the
same prestigious graduate school of management in Manila. Since then,
negotiations for collective bargaining agreements (CBAs) were concluded
speedily with the help of the LMCC. The whole-hearted support of the
Union president and management's response to consider the union as a
partner in resolving labor issues, helped to eventually stabilize the
labor and management relationship within the company.

## THE ENTRY INTO A GLOBAL ECONOMY

Because of participation by The Philippines in the General Agreement on
Tariffs and Trade-World Trade Organization (GATT-WTO) in 1995, the LADC
anticipated that it would face stiffer competition in the world market
for bananas, and therefore, had planned to adjust to the challenges by
diversifying its interests and streamlining its current business. The
company converted its primary focus on agricultural to a more expansive
focus on agro-industrial enterprise. As a result, some of its LADC farms
transformed from agricultural to industrial use and it had to lay-off
some its agricultural workers. In direct response to this situation, the
company decided to establish the Lapanday Skills Training Center (LSTC)
in mid-1996 to prepare the workforce, their dependents and community
residents for adjustments to the demands of globalization and more
intense competition. Through the training center, the trainees acquired
new employable skills through courses such as building construction,
trade, heavy equipment operation, building maintenance services, and
basic computer operation and maintenance. Even programs to develop
gender sensitivity were offered by the center so that both men and women
understood the opportunities and threats facing them. These courses were
organized and delivered to the workers with the supervision of the
government's Technical Education and Skills Development Authority
(TESDA), which assures the quality of the training programs. Of the
total of 1,861 beneficiaries that have so far benefited from the course
offerings from 1996 -- 2000, about 50 percent of the re-trained workers
have already landed new jobs. Through this initiative, the LSTC believes
that it is contributing to the development of a technically skilled
workforce that can keep pace with its more developed Asian neighbors and
at the same time ensure a more adaptable work force.

In a similar vein, the **Lorenzo Community Development Foundation
(LCDF)** had set up learning centers for pre-school children, cattle
dispersal programs and health and alternative livelihood programs for
the plantation communities to address the larger development and
adjustment requirements of the communities dependent upon the company.

To cater to the more comprehensive development needs of its workers and
their families, the company also implemented a vigorous **family welfare
program**, comprising nine other activities (healthcare, nutrition and
sanitation, responsible parenthood, cooperatives, housing,
transportation, sports, values formation and income generating projects)
that were operationalized through the LMC and with government technical
assistance.

Truly, the labor and management partnership in LADC, with government
agencies supporting their company-wide programs, have dramatically
changed a once adversarial relationship in the company into a more
harmonious and driven one that is ready to compete in a gradually
globalizing market and more open business environment.

## CONTINUING CHALLENGES 

By the middle of the 1990s, the Japan market became more choosey with
the banana exports and imposed stricter quality standards due to the
entry of bananas from Central America and other Southeast Asian
countries, which made prices drop and reduced the Philippine share of
banana supply to Japan from 80 per cent to 60 per cent of their market.

Productivity growth is critical to LADC's' continued viability,
especially with the intensifying competition in the agricultural export
market and the stringent standards brought about by globalization.

To guard itself from more adverse prospects, the company decided to
enhance its competitiveness. LADC decided to give more focus on
complying with export-standard quality that begins at the tissue --
culture laboratory, where highly trained personnel use advanced
technological methods to propagate disease-free and high yielding
planting materials. Lapanday also decided to maintain business
relationships only with reputable fresh-produce buyers and distributors,
which own and operate modern energy-efficient cold storage and
pressurized ripening facilities to maintain the taste, freshness and
packaging quality of its products.

VI\. [KEY FACTORS THAT DEFINED SUCCESS FOR LADC]{.underline}:

In the evolution of a new labor-management-community partnership culture
at LADC, the authors can glean working principles that define LADC's
success:

1.  *Plantations, like LADC, are communities, not just discrete,
    indifferent business entities.* The LADC experience suggests that
    all stakeholders -- owners, management, labor force and their
    families, the community, and the local government together with the
    police, should act as one community because their survival depends
    on the survival of the plantation;

2.  *Management must perform its role as a good provider.* The company
    should help dependent communities and should be prepared to meet
    needs beyond those of the enterprise, including helping in the
    defense of the community. When the company performs this role well,
    external agitators would have difficulty bringing trouble to the
    company and its dependent communities;

3.  *Management should treat the Labor Union and its members as peers
    and not as children, especially when getting them to help in
    identifying and solving work-related and community problems.*
    Workers have both the capacity to understand their problems well,
    and given the opportunity of genuine participation they could
    effectively help solve the problems*;*

4.  *External challenges are good impetus for promoting unity, even to
    the point of inducing a willingness to sacrifice from among the
    stakeholders.* The peace and order problem at the LADC
    plantation-communities and the challenges posed by globalization
    rallied labor and management of LADC to work together in new ways
    that required sacrifices from both ends;

5.  *Government-initiated programs, like Labor-Management Cooperation,
    could be used and institutionalized by the stakeholders when they
    could derive practical benefits from the program and that the
    program is presented in a way that is compatible with the other
    interests of the stakeholders.* In the case of LADC, the LMC was
    used to promote more efficient conclusion of negotiations for
    Collective Bargaining Agreements by the workers' union and
    management of the company;

6.  *Agricultural corporations should be run in a way that promotes the
    development of its dependent villages.* The plantation owners should
    provide the workers and their families with playground, church,
    school, and sports facilities and support the related activities
    because the lives of their workers and their families revolve around
    the plantations;

7.  *Company -- sponsored mechanisms, such as training on
    entrepreneurial work and skills-building prepare the employees in
    adjusting to corporate re-engineering brought about by the effects
    of globalization and other forced adjustments.* The LDC foundation
    and the training center have been very instrumental in effecting
    these, and

8.  *Top management sets policies and directions in steering the company
    into the new economy.* From the CEO/Chairman (Luis Lorenzo Jr.) to
    the key officials (Lorenzo siblings and relatives, key managers) of
    the company, a more global outlook and a more professional type of
    management style contribute to its competitive edge.

That Lapanday had not only survived the more demanding situation but
managed greater prosperity despite such harsh environmental factors.
This is a credit to the new kind of partnership that it had managed to
promote between labor and management that enabled it to take advantage
of needed adjustment measures. This good relationship has paved the way
for LADC to take advantage of technological breakthroughs in fruit
culture and networking with internationally well regarded logistics and
marketing providers, which ensured that the bananas the company deliver
to the Japan market and elsewhere are conveyed speedily, economically
and maintained with the best quality. These attributes and assets are
what LADC believes will be the key guarantees to the company's
continuing success well into the future.