In developing countries, (A)dministrative systems are weak. Procedures, rules, and policies are outdated or poorly designed and implemented. They enable corruption which is one of the debilitating ‘diseases’ that paralyze the development of underdeveloped countries.

In an organization with a weak (A) system, budgets are not controlled effectively. For example, when working with a client in Greece, I asked to see his profit and loss book. He asked me with a smile, “Do you want my book, the book for my wife, or the book for the tax authorities”? These multiple systems are obstacles to managing accountability. When you take into account the fact that a significant amount of transactions are made in cash—again, to avoid taxation—you realize that financial controls in developing countries are weak or non-existent.

So, how do people in developing countries manage organizations without strong (A) systems? By hiring people they trust, — brothers, cousins, childhood friends, etc, — to fill top positions. They rely on (I)ntegrating social forces instead of on (A)dministrative rules and procedures.

This strategy does not always work well. Frequently, the so-called ‘trustworthy people’ turn out to have weak values and eventually take advantage of the organization’s lack of controls. Or they are trust worthy, but incompetent.

There is another angle from which (I) can substitute (A): an organization can build its relationship with an external force, such as a government or another company, on a system of IOUs. By this, I mean that a person will do a favor for someone whose help they will need in the future.  When the time comes, that person will call on the other to reciprocate. This system of IOUs explains why tribal relations and loyal friendships are particularly important in organizations in developing countries. When people in these organizations help their friends, they are helping themselves. They do everything in their power to help their friends so that their friends will do everything in their power to help them advance.

Politicians often participate in this network of IOUs. Some politicians in developing countries accept financing from criminal organizations; when those same politicians are elected, they are expected to do favors for the criminal organization, like pardoning criminals or providing amnesty.

For instance, Zoran Đinđić, Prime Minister of Serbia from 2001 to 2003, asked a criminal organization to protect him from the government in power at the time of his election.  But, once in office, Đinđić refused to return the favor, so the criminal organization assassinated him.

It is not easy to reverse the system. Replacing (I) with (A) is not simple at all. There are powerful entities who benefit from the system as it is. These people dominate the system, and they won’t allow it to change.

In Mexico, the politicians have immunity, so using the system of favors does not endanger them. Why would they legislate a strong (A) system instead?

It is the lack of law and order, the lack of (A), that keeps developing nations from developing.

Just thinking,

Dr Ichak Kalderon Adizes
Founder and CEO, Adizes Institute Worldwide