BARE BONES, BRASS KNUCKLES, NO FRILLS:
Creating Accessible Quality Education

Asian Forum on Corporate Social Responsibility
Crowne Plaza Hotel, Metro Manila Philippines
September 26, 2006

A very pleasant good afternoon to all!

Let me begin by briefly wearing my hat as conference chairman, and thanking all our speakers and participants, and all our sponsors and partners, for what I hope we all agree has been another truly exhilarating forum! It is no wonder that this Asian Forum on CSR has grown not only in depth and scope, but also in terms of attendance and sponsorships, and I look forward with great anticipation to next year’s forum, and the succeeding years’ conferences.

As we enter the closing plenaries of this year’s Forum, there is probably little else that needs to be said. However, I do hope you will find some relevance in some observations I would like to share regarding the experience of my company, PHINMA, in attempting to make a viable business out of providing high quality education that is accessible to the poor.

For the past fifty years, PHINMA built its name, reputation, and success in manufacturing, in particular, of cement. Just about a decade ago, PHINMA owned and/or managed cement companies had almost Php 18 billion in assets and sales of Php 10 billion. Through Bacnotan Consolidated Industries, PHINMA had stakes in four cement plants while managing two other plants. Combined, these PHINMA managed plants had a total annual finished mill capacity of 8.2 million metric tons of cement. From cement to paper to roofing and coal – PHINMA produced the material used for many of this country’s roads, bridges, and skyscrapers.

Not too long ago, we decided to mostly leave our legacy -- manufacturing -- and move into new territory – services-- primarily those that every Filipino household needs – housing, power and electricity, finance, and education. Yes, education -- for us this was not to be a peripheral activity, nor part of an outreach program, rather it was to be a core business of the new PHINMA -- one of the pillars on which we would erect our new future. Hence, in 2004 we purchased Araullo University, an institution of around 6,000 students in Cabanatuan, Nueva Ecija and in 2005, Cagayan de Oro College, with some 5,000 students. With these steps, we had moved from the production of the material buildings are made of, to the formation of the material that nations are built on, her people.

Intuitively, there is no doubt that education is important for national development. We are all aware of the significance of an educated, highly skilled populace especially in this more competitive global economy. According to the World Bank’s research findings, an additional year of schooling raises incomes by 10% on average while a lack of education means lower wages. A year of schooling of the mother reduces child mortality by 10% while an increase of 1 percentage point in the share of women with secondary education is estimated to raise per capita income by 0.3 percentage points.

Our own vision is to provide education through a network of at least five universities or colleges in key education centers around the country, the PHINMA Education Network. The goal is to have 100,000 students in the system; our chosen market, the lower C and the D markets. Hence, in both Araullo University and Cagayan de Oro College, as intended, the students come primarily from these lower income classes. Ours are the children of our farmers, policemen, public school teachers and other government workers, of our pedicab drivers and our vendors and manual laborers.

Why choose this market? Because if education is to contribute to genuine development in the Third World, then this is the market to which it must cater. In the Philippines, more than half of the population lives on between five to 20 dollars a day; and around a third lives on less than that. Globally, nearly half of the world’s population, around three billion people, lives on less than two dollars a day. It is for all these that education must become a bridge out of poverty. And, the first order of business to making this happen is to make quality education accessible.

The market the PHINMA Education Network is committed to serving is the marginal in Philippine society, the students that need quality education the most -- that need the best and greatest opportunities to improve their lot in life. But how do we plan to provide both quality and accessibility? If we want to serve this segment of the market, one that is extremely sensitive to price increases and income decreases, then we cannot rely on merely increasing our tuition fees for revenue growth. Tuition at private tertiary institutions has been increasing annually at around seven to ten percent; incomes of the poor have not in any way grown as fast or even grown at all. How then do we attract and keep the best faculty, provide adequate and appropriate facilities, all for annual fees of roughly 450 dollars, our actual present matriculation?

Since access and affordability is a key goal, we have reduced education down to its most important, essential elements, the right facilities and learning material, a proper classroom, and a great teacher – nothing less, nothing more. In this world, airconditioned classrooms are great to have, but not necessary, a championship basketball team raises school spirits but does not raise the professional board passing percentage, a world touring choir, brings fame and prestige, but does not help our graduates land jobs with the appropriate government agencies. All of these increase the cost of education – they are nice to have but are not necessarily necessary.

In order to control our costs, we have centralized our backroom services such as accounting and human resource management. We are not spending heavily on administration – choosing instead to use the same people, systems, and processes across the system. Moreover, maximizing information technology, we have cut down on non-teaching personnel focusing our resources instead on those on the front lines, the faculty. As a result, while across the Philippine education industry a ratio of one non-teaching employee to one faculty member is the norm (it actually goes as high as three is to one), ours is one non-teaching employee to 2.5 faculty members.

In addition, we monitor very closely other aspects of our resource utilization, from units supplied to units demanded to classroom and space utilization. Our belief is simple, every dollar saved allows us to keep our fees low and therefore keep our education accessible.

Nor are we spending heavily on academic research, choosing instead to focus on teaching skills and classroom relevant research (this in particular is a sensitive issue for Universities). We admit without shame that our teachers spend most of their time in the classroom or on classroom related activities. We do not drive our faculty to publish; instead we demand they teach well. For the PHINMA Education Network, it is not publish or perish; it is teach, rather teach well, or perish.

Our education for this market, the PHINMA education, must be bare bones, brass knuckles, no frills education. We provide what is necessary for our students to learn the most that they can in order to achieve the goals most relevant to their situation, nothing more, nothing less.

It has been bit over two years since we bought our first school. By this time we have put most of our management systems in place and have made significant changes in the academic cultures and practices of our two institutions. The improvements in the facilities and faculties and our branding and marketing activities have produced quick results. Freshmen enrollment increased after the entry of PHINMA, reversing years of declining enrollments in both schools. In terms of academics, expectedly, the results of innovations do not become apparent until a few years after their introduction. However, in such a short period of time, we have managed to attract better faculty, better students, AND improved performance in the professional board examinations. Such bodes well for the quality of PHINMA’s future graduates.

If (or when) we succeed, we will have made life better for the 100 thousand students who will walk the halls of the PHINMA Education Network. If we double our network to ten schools, then maybe we will make life better for 200 thousand. However, there are around 2.4 million higher education students. This represents less than 20% of the age cohort that should be in college. There are almost 20 million students in the basic education system. Life should be made better for all our country’s youth and children.

The PHINMA Education Network, even in our most aggressive and optimistic projections, will touch the lives of less than one (1) percent of this population. The resources of business put into education, estimated by the League of Corporate Foundations to be around Php 1.2 billion annually, also amounts to less than one (1) percent of the annual budget of the Department of Education. But if education is to contribute to genuine development, not only must it target the poor, it must reach as many of them as possible.

For this reason, a number of very concerned Chief Executive Officers have recently banded together and organized PBEd, Philippine Business for Education. Our goal is clear, together with education experts and University presidents, with those more knowledgeable in education than us CEOs: to advocate policy and institutional reforms needed to make the Philippine education system effective and efficient, universal and inclusive. Our kids, all kids, need the best opportunities possible to improve the quality of their lives. For this to happen, the entire education system must change.

Ladies and Gentlemen, through the PHINMA Education Network and its other businesses, PHINMA is trying to do its share in making lives better for our people. However, we have realized that to truly impact on the life of the nation, we must go beyond our corporate strategies and programs and headquarters, and shape the very macro environment within which we live and work. Moreover, we must search for ways to focus and unite our individual efforts in order to maximize gains and multiply impacts, especially in the education sector, a sector which I have come to realize through PBEd, is important to all of us. For if not, we may find our successes overshadowed by a failure to improve the lives of the larger majority of youth and students.

A final point, I am often asked: are you making money or are you providing education; is your main objective profit or is it service. The “business of education” is apparently a puzzling thing for many. Thus, we have received two forms of good wishes. There are those who come and tell us how noble our efforts are, for this is what our country needs. Then there are those who a bit ashamedly whisper “good choice”, you’re going to make tons of money. They whisper because it seems wrong to make money off such a basic human need.

CK Pralahad, a popular management guru, argues for the need for and viability of businesses servicing those at the bottom of the pyramid. He contends that servicing the poor, not as a cause or an act of charity, is an effective AND often successful business strategy. Most significantly, he reasons that in order for social services, or services directly targeted toward the poor, to be sustainable, they must be profitable.

Similarly, it is our belief that making high quality education profitable and affordable are not two separate objectives or tasks; they are one and the same. These are not two different strands twined together; they are one and the same piece of string. High quality profitable affordable education should be one and the same thing. Profit, drives our innovation; it drives our focus on the poor; it drives our obsession for academic quality. On the other hand, high quality education at affordable tuition fees will draw the students in and thus drive our profitability.

This is in the end the direction to which we must move corporate responsibility. Our citizenship must go beyond the projects and programs of our foundations. Rather, our very businesses and strategies must make lives better. Citizenship must eventually be core, not peripheral.

For us in PHINMA we seek nothing less than to transform through the PHINMA Education Network and Philippine Business for Education our country’s education system. For nothing less will make a difference in the lives of thousands upon thousands of our youth. And nothing less will make a better life for our people.

- Ramon R. del Rosario, Jr.