Mar 122014

Professor Dave Ulrich, the most influential international thinker in HR and author of over 25 books, talks about his proposed visit to Colombo on April 30 and the key topics he plans to address in Colombo.

By Dinesh Weerakkody

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address?Organisations today compete not just by having financial, strategy and operational capabilities but by building competitive organisation capabilities. These organisation capabilities come from talent, leadership and culture. Business leaders are ultimately responsible for managing these organisation capabilities and HR professionals should be thought partners to make this happen.I will review the ideas and specific tools for building strong organisations as CEOs, business leaders and HR professionals.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? Sri Lanka is looking to create a knowledge hub to attract and retain the best and the brightest talent in the region and to attract FDI. Would you like to share some experiences based on your recent work in Singapore?A county wins in the global FDI marketplace by having a focus or uniqueness, just like a company in the consumer marketplace. For example, Ireland focuses on manufacturing/operations, Dubai on tourism and financial services, Switzerland on pharmaceuticals and Singapore on human capital insight. The Singapore government, industry, academia and labour pooled resources to create a human capital leadership institute that would provide knowledge about talent and leadership to the region.   

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? You have had exposure to M&A in the US, what are some of the business challenges surrounding M&As?In the past most M&As failed because the culture was not taken into account and 30 to 40 percent of M&As reached their expected cost of capital. When culture is taken into account before the M&A, success rates get into the 50 percent range.  These cultural audits look at the cultures of each of the merged companies and try to reconcile them. But to get to the 60 to 70 percent range, leaders need a new definition of culture.  Instead of looking at culture as values, norms, expectations inside a company, they should start the dialogue on culture from the outside in … what do we want the new firm (post M&A) to be known for by those who will use our services? This new culture based on the resources of the newly merged companies then endures because it is tied to and drives customer value.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? The HR profession for many years has focused on the internal customers rather than delivering value to the external customer. Has this changed?HR roles and expectations are changing. In recent years, HR has connected with business strategy. Strategy was a mirror which reflected what HR professionals should know and do. But the mirror focused inside the company, not outside. Now, instead of a mirror, HR sees a window into the outside world and anticipates that world so that the organisation can respond.  Instead of being “employer of choice” HR needs to be “employer of choice of employees and customers”.  An external perspective means that HR understands both general business conditions (social, technological, political, economic, demographic trends) but also expectations of external stakeholders (customers, investors, communities, regulators).  Turning these external expectations into internal actions brings sustained value to a company.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? Talking of talent, what are leading global companies doing to uncover distinctive talent contributions and deploy talent more effectively to create lasting value?Instead of starting with key people, great companies are starting with requirements of key positions. Once position requirements are defined through an outside in perspective, key people can be matched through staffing, training or development.  In addition, organisations are looking for people who are fully engaged, not just by their behaviours but by their hearts and minds. This work is in our book ‘The Why of Work’.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? How can organisational culture play a vital role in shaping talent and also to manage the identity of the organisation in the mind of their key stakeholders?Culture has often been thought of as norms, values, expectations and behaviours of employees inside an organisation. We like to think of defining culture (and leadership) through external expectations. What does a company want to be “known for” by key customers, investors, and others? How does this external identity (or firm brand) become woven into the organisation. When this happens, the culture is not just a value set but an incredible valuable value set because customers will pay a premium for it.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? What will the HR profession look like in five years and what are your key predictions regarding the future of HR in a business?A discussion of the future of HR does not start with the function of HR but with the requirements of businesses. Increasingly, businesses succeed and/or fail based less on access to capital, unique strategies or operational excellence but on how to create organisation capabilities that enable these business outcomes to occur. HR becomes the architect and anthropologist to identify and create these organisation capabilities. This shifts HR from an administrative provider function to a thought partner function.

Q: Dave you are scheduled to be in Colombo on April 30 to address the HR community in the morning and the CEOs in the evening? What are the topics you plan to address? Finally, what competencies should HR professionals harness to face the emerging business challenges and for the success of the HR profession?We have studied HR competencies for 25 years and seen the evolution of the profession. In our most recent (2012) study, we have found data from over 20,000 HR professionals and line managers and found six competence domains:

    HR innovator and integrator:  Able to offer integrated HR solutions to business problems.
    Capability builder:  Able to diagnose capabilities and shape and evolve a culture that matches customer expectations and strategy.
    Strategic positioner:  Able to position the organisation in the business context and with key internal and external stakeholders.
    Credible activist:  Able to build relationships of trust with line managers and employees and to take a proactive point of view about the business.
    Change champion:  Able to initiate and sustain change.
    Technology proponent: Able to use information to make informed decisions. 

The work is referenced in my two books:  HR from the Outside In and Global HR Competencies.

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Mar 052014
US draft stops at Navi Pillai inquiry into HR crimes of ‘both parties’

A draft resolution on Sri Lanka that is to be tabled at the UNHRC later this month by the USA, UK, Montenegro, FYR of Macedonia and Mauritius was put to circulation on Monday. Contrary to the trumpeting by sections among Tamils expecting US-UK justice through international investigation on war crimes, the draft just harps on OHCHR investigation into “alleged violations and abuses of human rights and related crimes by both parties in Sri Lanka.” On the other hand, the draft that fails in recognising Tamils even by name not only provides more space and time for the completion of their structural genocide but also binds the UNHRC with supporting the “unified land” of the genocidal State.

PDF: Draft resolution on Sri Lanka circulated at Geneva

The extent of the open insult by the US-UK draft to the national question of the genocide-facing nation of Eezham Tamils could be seen by the draft’s call upon the Government of Sri Lanka to investigate the Weliweriya incident being treated on a par or even preceding the draft’s ‘encouragement’ to the government to provide the NPC and its chief minister “with resources and authority necessary to govern, as required by the 13 Amendment of Sri Lanka’s constitution.

The East is not only abandoned totally to its genocidal plight politically, but also militarily, as the draft reminds the demilitarisation of only the North.

Counting the trees, and allowing the crux of the matter to continue, the US resolution as usual was harping on the implementation of Sri Lanka’s LLRC farce and cosmetic changes for the whole of the island.

The ‘transitional justice’ the draft is envisaging in the form of only accountability and reparations, seems to offer a range of escape routes to the Sinhala State and its international genocidal partners to escape by hoodwink, while materialising the ultimate agenda, i.e., completion of genocide that is agreed upon between the partners for their mutual benefit.

Any international resolution that is not acknowledging the genocide as genocide and is not coming out with an international transitional mechanism to stop it, is explicit complicity with the genocide.

The resolution, without any mention of Tamils even by name, was reducing the national question of genocidal magnitude into petty issues of ‘minorities’ or ‘religious minorities’. The solution it was envisaging was ‘devolution of power to the provinces’, treating the historical issue in the island as something administrative, common to all in the island.

The draft at its maximum engages the OHCHR into another investigation as a camouflage and provides one more year for the Sinhala State to continue with the genocide and annihilation of the nation of Eezham Tamils in the island.

The UN High Commissioner for Human Rights Ms. Navi Pillai, who will be conducting the investigation in the event of the resolution getting through, denied of even hearing about genocide when she visited the island last [See video evidence below].

In the dictionary of the US Administration, applied in the context of Eezham Tamils, ‘reconciliation’ means subserviently accepting genocide.

The draft further confirms that the USA and UK, the main architects of the genocidal war against Eezham Tamils in the island, are determined to see the completion of the structural genocide too, with irreversible effect.

The inclusion of Mauritius in tabling the resolution is seen as New Delhi’s partnership by proxy with the US-UK designs.

[Full Coverage]

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Feb 142014
Pathfinder Economic Alert SL’s development prospects: How to overcome emerging HR bottleneck

Sri Lanka has potentially extremely favourable medium-term prospects. In addition, macroeconomic conditions are likely to be more benign in the short term with 2014 being better than last year, provided the US Federal Reserve’s tapering programme does not cause severe turbulence in emerging and frontier markets.

However, there are challenges that need to be addressed if Sri Lanka is to realize its full potential. It is arguable that the lack of the necessary human resources will be the most significant binding constraint that holds back the country’s development.

At present, the human resources necessary to support the government’s five-hubs + tourism strategy are not available within the country.

No more ‘drags’ i.e. protectionism, war
Sri Lanka has been enjoying the most propitious set of circumstances since 1950s. Over the last 50 years, there has been a number of major ‘drags’ that have undermined the development prospects of the country.

These include a sharp secular decline in the terms of trade for 25 years, commencing in the late 1950s; a demographic surge “60s and 70s”; dirigiste inward looking policies boosted by economic nationalism (60s and 70s), which proved to be extremely inappropriate for a small, open, resource scarce economy (resulted in economic stagnation: low investment, low growth, high unemployment and queues to obtain even basic essentials); and a 30-year civil conflict. Today, there are no such major ‘drags’ on the economic prospects of the country.

Favourable geography and FTAs
In addition, economic geography is more favourable than it has been for several centuries. Sri Lanka is located in Asia, the most dynamic region in the global economy. Furthermore, it enjoys extremely close bilateral relations with China and geographical proximity to India, the two Asian giants which are rising global powers.
With the likely completion of the free trade agreement (FTA) with China and the existing Indo-Lanka FTA, Sri Lanka will have preferential access to a market of 2.5 billion people. This, combined with the proposed commercial hub legislation, is a potential game changer.

This provides a framework for achieving the foreign direct investment (FDI)/exports (rather than remittances/foreign commercial borrowing) led growth that has proved so elusive for Sri Lanka, unlike the successful economies of East and South East Asia. Sri Lanka’s lack of success in this respect is an important factor in explaining why a country, which was ahead of even South Korea and Singapore as late as early 1960s, has fallen so far behind today.

Government and private sector looking for excuses
While successive governments did not act emphatically in creating an easy-to-do-business climate, a substantial section of the private sector has been in their protected comfort zone or engaged in rent-seeking activities. Sri Lanka’s, governments and businesses have been good at finding excuses for our poor export performance.

However, the bottom line is that we are uncompetitive and do not produce enough goods and services that the rest of the world wants to buy from us (lack of competitive supplies). The government’s target of sustained growth of 8 percent is not possible without a very significant improvement in export performance.

Correct handling of key challenges
As the Pathfinder Foundation (PF) has pointed out time and again, the first step for building a more competitive economy is to achieve more sustainable fiscal outcomes. The budget has been the main source of instability in the system for the last 35 years. It has consistently pumped excess demand into the economy.
As a result of wrong fiscal policies, Sri Lanka has been a high inflation, high interest rate and overvalued exchange rate economy – diametrically the opposite to the successful economies in East and South East Asia. In this respect, it is commendable that the authorities have attached high priority to fiscal consolidation. It is still a work-in-progress with concerns regarding arrears and contingency liabilities.

It is important that the government’s stated trajectory of fiscal consolidation is achieved in order to boost the underlying competitiveness of the economy. Energy costs are another important determinant of an economy’s competitiveness. High energy costs have undermined Sri Lanka’s growth prospects. Here again, there are prospects of improvement.

The completion of Norochcholai phases II and III and Sampur should reduce generation costs and contribute to making energy costs more competitive. The improvements in internal and external connectivity achieved through development of roads, ports and airports should also boost competitiveness by reducing transaction costs.

New political cycle: Opportunity for reforms
The commencement of a new political cycle, expected within the next year, also provides an opportunity to address a number of structural issues. The need for reforms in each of the factor markets (land, labour and capital) as well as the SOE sector have been well known and well documented for many years. A package of structural reforms will not only increase productivity/competitiveness but also boost investor confidence, both domestic and foreign.

There seems to be evidence that a lack of confidence has been holding back investment. FDI flows have been disappointing. In addition, domestically banks are liquid but credit to the private sector is still lagging. In addition, corporate are cash rich but do not seem to be investing as much as they can. These trends seem to indicate an underlying lack of confidence and reinforce the case for a package of structural reforms to support the macroeconomic stabilization that is underway.

Goldilocks scenario
The ‘Goldilocks’ (upside) scenario for Sri Lanka would be:
Continued fiscal consolidation
Package of structural reforms, leading to further liberalization.
Structured interventions, such as FTAs, the commercial hub legislation involving free ports and bonded areas, the port city and other mega projects in pursuit of the five-hubs + tourism strategy.
Even if a concerted effort is made to realize this Goldilocks scenario, there is a binding constraint that is looming up on the horizon: a lack of the necessary human resources.

Human resources: Need for breaking out
The present scenario of increasing dependence on remittances and a tight domestic labour market is not consistent with the five-hubs + tourism development strategy. Already shortages have emerged in key sectors, such as apparel, tourism and ICT/BPO. The problem is compounded by an asymmetry between the current learning outcomes and the skills required to support the five hubs + tourism strategy.

Short and medium/long-term measures are required to address this human resource bottleneck in order for the government’s strategy to gather momentum and place the economy on a sustained accelerated growth path. Priority should be attached to the following:

In the short run, regulations, including visas, should be relaxed to permit the import of labour to meet shortages in key sectors, at least to support the five hubs + tourism strategy. There is plenty of precedents for this that can be obtained by studying the experience of South Korea, Malaysia and Singapore. North America, Europe and Australia have also resorted to such policies.

In the medium-term, education, training and skills development should be well aligned with the demand for labour (skills generated by the five hubs + tourism strategy). This challenge can only be met through a rigorously pragmatic approach to a combination of public, private and mix provision of education, training and skills development. Adherence to dated ideology will only serve to impair seriously the development prospects of Sri Lanka and its people.

In the medium/long term the incentives should also be restructured to shift labour out of the two large wells of low productivity in the economy: subsistence agriculture and the public service. Agriculture accounts for 32 percent of the workforce and 11 percent of gross domestic product (GDP) i.e. productivity in this sector is 1/3 of the national average which is any way low when benchmarked with the successful economies of East and South East Asia.

This serious misallocation of labour persists because of the highly distortionary incentives created by the fertilizer subsidy, guaranteed price scheme and free water. Over time these would need to be reduced to release labour from low productivity agriculture to meet the demand for labour generated by the five hubs + tourism strategy. This process can also be facilitated by the development of metro regions around the country that is underway as part of the government’s urban development programme.

Similarly, public service pension reform, which is inevitable in the context of an aging population, will change incentives related to employment in that sector. The public service has increased from 600,000 (2005) to 1.4 million (2013). Here again, there is scope to redeploy labour from low to higher productivity/value employment over time to meet the demand for labour generated by the five hubs + tourism strategy.

Finding people for five hubs + tourism strategy
It is clear that a lack of human resources will be a major bottleneck that will constrain the government’s five hubs + tourism strategy. The highest priority should, therefore, be attached to addressing this problem in a pragmatic and non-ideological manner. It is important to recognize that economic nationalism is incompatible with a hubs-based strategy which by definition has to be outward looking.

 (This is the 56th Economic Alert published by the Pathfinder Foundation. Readers’ comments are welcome at

Jan 302014
Sri Lanka Tourism in 2013: The good, the bad and the ugly
By Srilal Miththapala
The past year was certainly a ‘mixed bag’ for Sri Lanka tourism with possibly the ‘highs’ slightly outweighing the ‘lows’.
A quick overview of the past year, albeit weighted towards the hotels sector, is as follows.

Arrivals and growth
The Sri Lanka Tourism Development Authority (SLTDA) had set an overall target of 1.2 million tourists for 2013 and by the end of November, this target seemed to be unreachable with total arrivals for the 11 month ending November 2013 recording only 1,016,228 arrivals, a 15 percent increase YOY. In fact the Director General of Sri Lanka Tourism Dr. D. S. Jayaweera  is on record saying that the target for 2013 has to be revised down to 1.1 million arrivals (Daily FT: July 29th, 2013). This view was also echoed by the Emeritus President and CEO of PATA Lakshman Ratnapala in October 2013 -“Sri Lanka tourism tumbling off target”

However, the year ended with controversy where the SLTDA suddenly ‘re-validated’ the year-end figures at the eleventh hour, arriving at a  total arrival figure of 1,274,593, with an YOY increase of 26.7 percent, contradictory to all the expert predictions. Errors in reconciling the on line figures and manual figures are said to be the reason.
While we can split hairs about the accuracy of the numbers, what is important to note is that the overall YOY growth had steadily declined from 46 percent in 2010, 30 percent in 2011, to 17 percent in 2012. So, in the absence of some major promotional initiative in 2013, (which was not prevalent ), it is quite surprising how growth suddenly shot up to 27 percent in 2013 completing reversing this trend.

It is also pertinent to compare the 2013 growth rate in the region as released by UNWTO.

It is therefore intriguing as to how Sri Lanka is showing such a large YOY growth for 2013, completely going against the world and Asian trends.

In the meantime, the Maldives ‘pipped’ Sri Lanka to reach the magical 1 million arrival figure on the 25th of November 2013 and Sri Lanka followed closely behind a few days after.

Hence while certainly there will be continued organic growth of the sector, it is difficult to imagine how there will be quantum advancement, in the absence of any focused destination marketing and branding plan in place.  (See below)

Destination marketing
The lack of a cohesive strategic master plan to promote and market the destination has been talked about a great deal. The slowing down of growth, after the immediate post war pent up demand is widely attributed to the lack of a cohesive marketing plan. Many tourism professionals agree with this, and a senior hotelier and former Vice Principal of Hotel School Anil Perera was very forthright in stating that “lack of a proper marketing strategy by SLTPB, and the campaigns being handled by inexperienced, inefficient persons had resulted in Sri Lanka not been marketed properly” (Ref. The Island – 24th December 2014).

There were several adhoc ‘Mega Promotional campaigns’ by Sri Lanka Tourism in China, India, Russia and other Eastern Bloc countries. Certainly these would have had some positive impact, but on an overall cohesive basis, there was no planned approach to study generating markets, assess newly developing tourism consumer trends and design campaigns accordingly.

Media familiarization tours coordinated by the SLTPB  took place for journalists from foreign countries with the hotels and inbound tour operators’ support and sponsorships, which have proved to be quite successful in promoting the country.

In the meantime, the private sector continued participating in most of the international tourism fairs with World Travel Mart (WTM) in November 2013 drawing one of the largest Sri Lankan contingents ever with over 60 companies represented by over 120 participants. The overall design of the WTM stall was completely revamped this year to give a much more appealing and eye catching look, giving a very ‘Sri Lankan’ flavour  depicting  the entrance of Yapahuwa Palace, ‘kudos’ to the SLTPB.

Private sector-led promotions
One of the most successful private sector led promotions was John Keells Cinnamon Group of Hotels partnering with Miss France Pageant 2014, where 33 finalists of the Miss France 2014 contest were hosted by the Cinnamon Hotels and Resorts for one week in the country, in association with Sri Lankan Airlines.
Subsequently, Sri Lanka was featured in the main pageant, giving tremendous exposure to the country. Such individual efforts from the private sector, most often supported by Sri Lankan Airlines, was the only form of cohesive promotional activity that took place, which has a wide reach and impact on consumers in a foreign country.

This initiative in one of Sri Lanka’s strong western markets, France, would have had a huge impact, much more than any paid advisements or individual trade fair promotions could have achieved.

Apart from this, many of the large hotel companies sponsored and brought down several wildlife documentary film crews to showcase Sri Lanka’s spectacular wildlife, which included the Discovery Channel, BBC and Animal Planet. This initiative has also helped to promote the natural beauty of Sri Lanka to a wide range of the world public.

New developments
Several new hotels opened their doors for business in 2013. It is estimated that some 9000 new hotel rooms have been approved and are in the process of being build. Newspapers report that 43 new hotels have commenced operation during 2013 (it has been virtually impossible to obtain any information from SLTDA, regarding the details of these new hotel developments. The writer tried valiantly to obtain this information without any success). However, it is estimated that about 3000 of these rooms (1/3) is said to be being built in and around Colombo, which will, (experts believe),  result in an oversupply of tourist rooms in the City.

In the desire to drive construction of hotel rooms to meet the ambitious target of 2.5 million tourists by 2016, there seems to be a ‘carte-blanche’ approval scheme in place by the SLTDA, without any consideration for the type of hotel, or the carrying capacity of a particular tourism area being given when approving a project.
A case in point is the Yala area, where already there are serious issues with over visitation of the Yala National Park, the most popular National Park of Sri Lanka. On November 29th 2013, Yala had the highest number of visitors ever in one single day of 3,300 bringing in record revenue of Rs.3.3 million. However, more than 500 jeeps were inside the park this day. One can imagine the disruption caused to the animals with such unregulated visitation. It is the proverbial ‘killing the goose that lays golden egg’. Currently, there are 22 hotels and guest houses in the Yala vicinity, amounting to 505 rooms. There are apparently 9 more hotels approved, which will bring in another additional 195 rooms into operations, which will only add to the serious over visitation problem.

Hence, there should be some moratorium to limit the growth in certain areas, which have reached saturation level, and also to stimulate growth in certain other areas, where development is needed, possibly by offering some incentives to investors.

Sri Lanka tourism has lacked big branded hotel names and it is reported that several international brand names have commenced some form of construction activity in Sri Lanka. This augurs well for the destination without any doubt.

The Katunayake express way has given Sri Lanka tourism a big boost and the Outer Circular express way and the extension of the Southern highway to Matara will certainly create greater tourist movements. The commencement of the Kandy highway is indeed an important step for the development of tourism and all tourism stakeholders look forward to the speedy completion and commissioning on this expressway.

There is much controversy and debate about the setting up of casinos in Sri Lanka. Tourism experts see this as somewhat of a ‘necessary evil’ in the tourism trade. If casinos are carefully developed, and managed, it can be a game changer for the industry. Singapore tourism was reaching a plateau with growth rate petering out, when the government of Singapore took a strategic decision to introduce to carefully managed casinos, which has given Singapore tourism a complete new lease of life, with monthly arrivals now exceeding 1.2 million on the average.

In Sri Lanka too perhaps this model could have been followed by developing casinos in one central area away from the city (possibly in Kalpitiya), instead of having them in the city (this was suggested in the ‘Way Forward’  for Sri Lanka Tourism report,  prepared by the Private Sector for the Secretary, Ministry of  Finance in April 2010) . Not with standing this, there are now  3 mega ‘integrated development projects’ that been approved in the city, which no doubt that will make a significant impact on Sri Lanka tourism portfolio, although there may be some socio-cultural fallout.

Emerging tourism trends
There appears to be an emerging tourism trend, where there is a large influx of tourists, seeking a more authentic experience, rather than the conventional tourism offering. Consequently, these tourists seem to be seeking out cheaper accommodation units and home stays, where they have a richer, more down to earth exposure of what Sri Lanka can offer. These tourists appear to be more of the younger age group and are much more knowledgeable, utilizing internet applications to find their way about, seeking adventure and authenticity, and are more conscious and concerned about the environment.

However, most of the accommodation units used by these ‘new’ tourists are from the informal, unregulated sector of tourism in Sri Lanka. Due to the fact that these units are not officially recognized, no data is available with the SLTDA regarding this sector, through the formal reporting channels. Hence, we may be missing out an important and newly emerging trend that is, developing in Sri Lanka tourism sector.

The writer has conducted two surveys in the Ella and Sigiriya regions and found that there is a considerably large informal and unregulated tourism sector in these two areas, with over 40 unregistered units operating in each area.

However, it will be a simple task to assess this ‘leakage’ factor and analyze whether it is increasing YOY, showing a growing trend, if the proper data is available.
All these tourists’ arrivals get captured at the point of entry. However, the problem is that details of their stay are not recorded, since the unregistered accommodation units do not report on this. However, all the registered hotels in the country do report the foreign guest nights reasonably accurately to the SLTDA on a monthly basis as is required by law. Hence, it will be a simple analysis to compare the arrival figures, against the formal foreign guest nights, the difference of which will indicate this leakage figure.

Unfortunately, the SLTDA statistics for both 2012 and 2013 are still unavailable to analyze and study this important trend in Sri Lanka tourism (see Strategic Direction below).

Mattala airport
Certainly the new airport at Mattala can give Sri Lanka tourism a big boost, provided a proper strategy to market the entire product offering is in place. The airport is very strategically positioned in the Deep South, which can be a good launching pad to promote Sri Lanka tourism in the South and East coast of the country. However, there has to be strategic thinking to attractively price tours to these regions, partnering with tour operators, using chartered flights to land at Mattala airport in Hambantota. Unless such aggressive efforts are made to promote the whole area, the airport will not be fully utilized to bring out its full potential.

 No doubt  the expected high point for Sri Lanka tourism during the year was to be the CHOGM, which unfortunately seems to have ended as a damp squib as regard to the occupancy in hotel rooms. The City Hotels Association President, Shanthikumar said “ at the peak from November 15th to 16th, the normal average occupancy in the city hotels was 55%. However, from 10th to 13th November, the occupancy was 30 percent and from 13th to 14th, it was only about 40%. This was far below our expectations, where a minimum of 4000 city hotel rooms were expected to be occupied, but only 2,000 – 2,010 rooms were eventually occupied” – Daily Mirror 18th November 2013. This was reflected when the November tourist arrivals were released, showing only a 3 percent YOY increase, the slowest YOY growth for Sri Lanka tourism for many years. City hotels, which expected a very high occupancy rates ended up having large number of rooms unoccupied.

However, on an overall basis, certainly the event gave Sri Lanka tourism considerable exposure, in spite of the fall outs due to other political controversies.

The two main tourism associations SLAITO and THASL continued to carry the flag for Sri Lanka tourism. There was no change in the upper hierarchy of the governing Executive Committee of either body. The AGM of SLAITO was held on 24th August 2013 re-electing Mahen Kariyawasam as the President. In the meantime, THASL held their AGM at the newly opened hotel Kingsbury on 28th October 2013, re-electing Jayantissa Kehelpannala as the President (albeit under some very hot conditions!).

Impending HR crises in industry
The shortage of well-trained tourism personnel continued to be a major issue for the industry with the situation worsening with many new hotels coming up in the country and absorbing the existing experienced personnel. This matter has been talked about at great length, and many tourism professionals, including this writer, has brought this up at many forums. “While everyone is scurrying around trying to build and develop infrastructure and hotel rooms, the critical HR factor is a hidden issue, which will soon mushroom into a great crises in the near future, if not addressed in a strategic and holistic manner immediately” – Srilal Miththapala, Impending HR Crisis in the Hotel Industry, Daily FT.

There are moves by the Sri Lanka Institute of Tourism and Hotel Management (SLITHM) to forge partnerships with a foreign tourism educational body, to revamp their operations. This is indeed a very good initiative, but there are still remains the fact that SLITHM alone cannot produce Sri Lanka tourism industry’s entire people requirement. It is up to the private sector tourism bodies (Ceylon Hotel School Graduates Association, THASL) to take the initiative to draw up a strategic master plan on how this problem should be addressed, and initiate a private sector / public sector partnership urgently.

Destination accolades
There was a marked drop in overall tourism accolades and ratings by various world agencies for Sri Lanka. Last year saw Sri Lanka being assessed as the best emerging destination in the world for travel for 2013 by the prestigious Lonely Planet publication. However, Sri Lanka does not feature anywhere in the rankings for 2014.

The absence of any such new form of recognition perhaps indicates that the interest for Sri Lanka could be waning, with the destination losing its ‘luster’.

Hotel rates
Much has been debated about Sri Lankan hotel rates, which many consider too expensive, and un- competitive among our Asian neighbors.

There could be some truth in this, where post war resort pricing has increased some 40-50 percent. The initial price correction was certainly badly needed for the hotels to recover from the decades of stagnancy, but there could have been an ‘over-correction’ which saw some occupancy dip in 2013. However, with the perception that the destination has become too expensive, there is some price correction that seems to have taken place, especially in the resorts, where most hotels have either held their prices for 2013/14 or in some cases discounted down. This is a common phenomenon and provided that the market forces are not interfered with, the supply and demand will provide correction.

However, this is not so in the city, where there is a minimum price stipulated by the government, which has to be adhered to. Debates still continue to rage regarding this between the hoteliers and travel agents, but fact of the matter is that with the destination now maturing, free market forces should be allowed to prevail.

Sustainability and tourism
The year showed more and more focus by tour operators and tourists on sustainability and environmental issues. Sri Lanka being identified as one of the 34 bio diversity hot spots in the world; it is quite easy for the destination to create competitive advantage of this aspect.
Unfortunately, the main private sector hotel sustainability focused project, initiated by the Ceylon Chamber of Commerce, the EU-funded Greening Sri Lanka Hotels Project (GSLH) came to an end in November 2013, after 4 years of successful operations. The project had more than 350 hotels registered and working on sustainable consumption practices. Many workshops, training programmes and awareness programmes were conducted all over the island and the GSLH project created Sri Lanka’s first dedicated Green Award for the hotel industry, which became a much sort after award by Sri Lankan hotels.
The project produced from its research, Sri Lanka’s first ever Water and Energy Benchmarks for the hotel industry.
Without a dedicated agency or organization continuously championing this cause, there is concern that the positioning of Sri Lanka as a sustainable destination may fall by the way side.

Strategic direction
As indicated earlier, there is no strategic direction as to how the Sri Lanka tourism sector needs to develop. The original positioning statement developed by the industry professionals some 6-7 years ago during the now defunct ‘Small Miracle’ Branding Campaign – Asia’s most Authentic, Diverse and Compact Island  is still very valid and should form the core foundation of Sri Lanka’s future tourism development.

Also analysis of statistical data and trends, supported by good research is vital for planning as against ‘knee jerk’ responses. It was Lord Kelvin, the British mathematical physicist and engineer, who said “ if you can’t measure it, you can’t improve it”.

Without reliable information and data, backed by good research and strategic thinking, Sri Lanka Tourism will continue to meander along in the ‘Backwoods of Asia’ , content to be another ‘also ran’.

Jan 152014
Many mergers & acquisitions ultimately don’t add any value: Prof. Ulrich
By Dinesh Weerakkody

Professor Dave Ulrich, the global HR Guru explains in an interview why so many corporate combinations that looked like such great opportunities and so good on paper often do not materialize or fall far short of expectations. The result more often than not is value destruction. Professor Ulrich has authored over 25 books and has consulted with half of the Fortune 500 companies. Excerpts:

Q: To begin, why are mergers and acquisitions important for business success?
Companies need to grow to succeed.  Growth can occur with new products, new geographies, or new customer connections.  M&A are a key pathway for growth in each of the three growth strategies. Therefore, with the globalization of the world economy, companies are growing through mergers and acquisitions in a bid to expand operations and remain competitive.  

Q: In the M/A world, is culture still the critical predictor of success?
When leaders want to shift strategy, they may proclaim a shift from product to service, from domestic to global, from efficiency to growth, but quickly run into an embedded culture that keeps desired changes from happening. In the M/A world, culture is no doubt the critical predictor of success. Therefore, being aware of and trying to integrate culture as part of merger improves success.

Q: It is said that most mergers fail because of cultural ignorance. There is ample research to show that despite investment banks giving a plethora of figures quantifying the synergetic benefits of the combination. Yet what finally determine whether a merger succeeds or fails is really its people. What are some of the people challenges surrounding Mergers and Acquisitions?
The broad question is how to make the whole more than the sum of the parts.  This means:

1.Pre merger:  making sure that cultural/HR issues are considered in merger choices.  This is SO important. With pre merger HR involvement, the changes of merger success go up dramatically.
2.  Post merger: Using HR practices to integrate the firm:
a. People:  making sure that the right people are in the right position … doing an assessment of position requirements
b. Performance:  aligning the performance management process so that they match … this is often a reflection of the cultures
c.  Information:  sharing an abundance of information about the new merger and its goals
d. Organization:  building new organization roles and responsibilities
3. Merger process:  mergers are about change and HR should be the change architect in a company … who to involve, how to involve them, etc.

Q: How do you deal with issues like talent retention, loss of productivity, incompatible cultures, clash of management styles etc. before and after the combination?
There is an evolution in the merger integration where these issues need to be dealt with much more openly, honestly and aggressively keeping the end results in sight.

Q: Can you share some research insights into how the culture integration must take place to ensure the combination delivers value for the companies involved?
I like to box into three phases.

Phase 1: Pre 1995:  cultural ignorance
M/A had about a 20-30 percent success rate, success defined as returning cost of capital for the investment in the 5 ensuing years. Often in this time period, M/A specialists would look for an economic fit (can save money by reducing costs) and a strategic fit (product or service complementarity) and the M/A would go forward.  Only to run into cultural headwinds when the two firms came together.  

 Phase 2:  1995-2010:  cultural integration
M/A success rated improved to 45 to 55 percent.  Culture was considered before the M/A to make sure that there was a fit and/or to anticipate the price (time and money) to merge the culture.  The focus for the newly formed company was to discover common values and to emphasize them in the newly formed organization. The good news with this approach is an awareness of culture (considered before the merger), the overlap of the two cultures (before the merger) and the pathway for the culture of the new company (after the merger).

Phase 3:  2010 beyond:  cultural innovation
In Phase 2, the culture focus was on common values looking backward. In Phase 3, we think we can get to 70 to 80 percent successful integration of the M/A work by creating a new culture.  In this case, the firms each come to the M/A with a set of cultural values based on their past.  But, the newly created firm should use a clean sheet of paper to innovate the new culture for the new firm.  

Q: How do you create this new culture?
 Creating a new culture often starts from the outside in.  Think of culture as a brand reputation:  what does the organization want to be known for by its key stakeholders?   This external brand identity should be connected to the internal cultural values.  By defining the internal culture through the expectations of the firm’s brand, the new company creates a new culture aligned with the intent of the new culture.

Q: Another challenge would be to sustain financial performance and realize the synergies that were envisaged pre merger? What are the key steps to ensure the KPIs are met?
Companies can take one of two extremes in mergers:  leave the new company as it is or quickly integrate the company.  Generally, the best strategy is to quickly integrate in two phases.  Phase 1 is efficiency.  A merger should drive out redundant costs and build efficiency.  This means replacing duplication … facilities, headcount, etc.  It is best to do this quickly.  Phase 2 is leverage … learning to leverage customers and products across the merged companies.  Some companies get into leverage where the largest long-term gains will come, but it is important to drive efficiency first.

Q: Lastly, at Boardroom level what are some of the challenges? Because according to research 60 percent of the cases, shareholder value was destroyed.
The Board’s role should be to ensure the synergetic strategic benefits of the union are fully realized by playing a leadership role.
Therefore, the Board should be asking management forward thinking, thoughtful questions such as:
1.  What are our criteria for merger?  (e.g., strategic fit, financial leverage, cultural integration?)
2.  Why does this proposed merger make the most sense for growth?
    a.  What are the opportunities of the merger?
    b.  Why should we merge vs. growing organically?
3. What are the integration risks we will face in this merger:  people, customers, Tax, competitor responses, etc.
4. What are the early indicators that we are on target?

Dec 242013
Labour crisis in apparel industry Is costly technology or humane HR best practices the solution?

The era of the closed economy of the left oriented state of 1970- 1977 saw only the domestic garments under the Brand names of Hentley, Maxim, Benhur and later the Duro products of Dasa Industries.

Then came the liberalized economy under the JRJ government and awakened the Export oriented garment industries in the first Free Trade Zone with a workforce of 30000 female workers under the GCEC the present BOI at Katunayake.

The social implications and other infrastructures were not geared to meet the sudden change in the area. Health & Safety standards were thoroughly inadequate in a snake infested locality. Basic Human needs were neglected and the Iron fisted administration were naïve and forceful. The young members of the Armed forces roamed the area and young female workers who lived in Boarding houses were easy prey. Resulting pregnancies of unmarried singles and medical clinics springing up like mushrooms in the Katunayake and Negombo areas were the talk of the day. The scandals pouring out was the beginning of the irreparable permanent damage to the character of the female garment worker.

Availability of manpower
The mainly Sinhala adult females from all over the country which comprised the  workforce was freely available and queues of 1-2 kilometers length of young females thronged to the BOI Job bank from the BOI office to beyond perimeters of the zone fighting for a placement in any Garment factory in the Katunayake Zone. Applicants who possessed references from the State politicians were given pride of place while many were turned down to return to their villages.

Factory Managers’ authority
The Board Room and Business acumen focused only on shipments and profits and the Factory Administration possessed absolute power to deliver the goods at any cost. This disastrous empowerment resulted in the neglect of basic Human and personal domestic needs of the largely female workforce.
Performances of Factory Managers were recognized and rewarded by the Board Room on the money spinning revenue brought in and the factory staff shamelessly trod on the female workers bullying and battering them at every corner to get the optimum production at minimum costs aided by the ignorance of the top management to provide the basic facilities for Personal needs.

Personnel/HR Manager’s role and status
The Personnel Managers were goaded by the top management and had to play the role of running round the factory hunting for wrongdoers and being used as the cats’ paw or the scape goat. The Personnel Managers now the HR Managers are the underdogs.

Except for a one or two companies the position of the HR Manager in the hierarchy is far below the average with no status or clout and report directly to the misdemeanors. Their salaries are below that of the other junior level staff resulting in low status and no respect from others for this very reason. Their indirect contribution to achieve company goals is not recognized nor are they consulted on any main issues. They are commanded to act on poor HR practices and these orders cannot be disobeyed or explained as incorrect.

The final say lay with an ignorant Factory Manager or General Manager whose interests are personal rewards and the good books of the top Management. The Top Management gropes in the dark and HR Issues are decided on hearsay of the Factory Manager or General Manager’s information. It was and still is a case of the blind leading the blind. Appreciation or confidence in the HR Manager or recognizing his/her capabilities does not exist.

Depletion of workforce
This scenario which continued for decades is still prevalent in the present day factories except for a few. HR continues to be blamed while the factory management continues to bully and batter the workers. Basic needs are granted but the most important personal domestic requirements are not recognized. The workers who migrated first from one factory to another within the Katunayaka Zone opted for other factories in other zones in later years. Thereafter the workers who rushed to garment industries for poverty and relief now find that earnings are not worth the sacrifice of their family life at home. They shun the garment industry.

Parents are reluctant to release their children to the industry as they are aware that they will lose their children forever and will not be able to get them close in times of illness or need or for any of their Personal family events. The already existing stigma on the characters of the garment workers added to the disregard of their domestic requirements have now made the entire country to shun the industry. Only the Estate labour who are way below poverty levels opt to work for a very short term temporarily in the industry.

The once long queues of the Sinhala workers are no more. A very thin margin of the Tamils are lured by company staff dishing out handbills on the roads in and around Colombo and in the distant and remote hill country competing with others in the industry to grab a would be recruit.  

The Tamil workers from the hill country comprise 40 percent of the work force. The Sinhala workers are diminishing day-by-day. This estate labour now in the apparel industry is also getting depleted day by day as their personal wants and access to their families in the distant areas at times of need are not realized. Recognition of the
Tamil workers personal needs as relative to their place of abode and culture of the hill country is not taken into consideration. Many decades ago the December Holidays for Christmas was planned for. This slowly changed over to the Sinhala/ Hindu New year. However, no provision or planning is made for the mostly celebrated Tamil Deepavali festival.

Production planning
Production and shipments are planned in keeping with the European Climatic seasons but no provision is made to include any planning for HR requirements affecting the labour whether seasonal or otherwise. While only a handful of the Top management go that one step further to put things right the apathy of the Top Brass of the rest of the companies continue. Realistic absenteeism percentages arising from the Social needs of a mixed workforce are not recognized.

Whilst this drama continues to unfold the Buyers or Customers and the European community keep on increasing the pressure to keep strictly within the outdated labour laws for the betterment of the workers welfare and by doing so unwittingly contribute to an ever increasing predicament of the workers.

Financial loss
Little does the Top Management realize that continuous idling of 40 sewing machines per day deprives 40 m/cs X  10hours production X dollars of loss per day. In addition expenditure on maintenance of Dormitories and meals provided by the companies are colossal and Costs for extensive recruitment campaigns are unimaginable with no permanent returns.

If the industry is to be prevented from going over the cliff to the quagmire by the death knell of the labour crisis an input of a drastic about change thinking is an urgency. If Kerry Packer could change the drab white uniformed game of cricket to a thrilling quick match then the Board Room should change attitudes to consult HR and not direct them and develop HR best practices to the highest levels to avert this crisis.

Dec 132013
SL intelligence squad behind attack on protestors in Trincomalee on HR Day
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[TamilNet, Friday, 13 December 2013 08:56 No Comment]

The masked men, who on Tuesday attacked a peaceful demonstration, which was staged by the relatives of missing persons in Trincomalee, belong to a squad operated by the intelligence wing of the occupying SL military, the organisers of the protest said on Wednesday. The members of the squad arrived through the Sinhala market, parked their motorbikes and launched the attack after covering their faces with clothes. More than one hundred peaceful demonstrators, most of them women, carrying the photos of their missing kith and kin, were brutally attacked by the men, who also destroyed the photos and placards on Human Rights Day in the city of Trincomalee while SL Policemen were watching the unfolding violent episode.

The organizer of the peaceful protest Sundaram Mahendran was injured and hospitalized and a Tamil National Alliance politician Mr K. Thiruchelvam, who was the former opposition leader of the Moothoor civic body, were injured and admitted to hospital.

Mr Sundaram Mahendran is still hospitalized on Wednesday, news sources in Trincomalee said.

The attacking squad, which was conversing in Sinhala, used batons and stones against the peaceful protestors. Several women were attacked. The attackers destroyed the placards and photos which were carried by the women.

A tense situation prevailed in Trincomalee city on the International Human Rights Day following the attack by the intruders.

The protest by relatives of disappeared was held near the Trincomalee bus stand at 11:00 a.m

[Full Coverage]

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Nov 142013
Leadership and succession

By Dinesh Weerakkody

Succession planning is a process for identifying and developing internal people with the potential to fill key leadership positions in the company. Succession planning increases the availability of experienced and capable employees that are ready to assume key leadership roles as they become available.

Today, succession planning has become a very important leadership process and a growing number of firms have formal plans in place. Yet, many firms and sole proprietors have a great deal of succession planning work ahead of them.

Among the challenging statistics that have emerged from many surveys on the topic are: slightly, more than half of firms don’t have a formal, signed and documented succession plan in place.

A number of boards know that they have to initiate a succession plan and start thinking about how succession planning is going to work, in order to ensure the firm increases the availability of experienced and capable employees that are prepared to assume these roles as they become available.

In general, the bigger the firm, the more likely that firm has a succession plan in place. In the case of a proprietorship, especially a family-owned business, one does not want be squabbling among family members later as we have seen often.

In the case of other enterprises, the shareholders would be anxious to see that the business is sustainable and one key element is that if there is a calamity by one or more top managers quitting that the business is safe. The boss who does not plan for succession is one who is insecure and feels that he would become redundant.
This is something that boards have to be mindful of and planning for succession must always be a key KPI that is tracked at board level. Though most firms understand the importance of succession planning, the actual application sometimes loses out to more immediate concerns. That’s understandable in lean economic times: when trying to survive with fewer employees, today’s work matters more than tomorrow’s plan.

Succession planning is more or less like preparing to sell your house — it’s not a good idea to notice your roof needs work or there are cracks in your foundation once your home is listed, it pays to have an orderly plan in place, that accounts for all contingencies and includes steps to maintain or increase the market value of your firm.
Most firms are missing out on one key aspect of succession planning which is, not having formal written requirements for succession. However, fundamental to any succession-management process is an underlying philosophy that argues that top talent in the firm must be managed for the greater good of the enterprise and a ‘talent mindset’ must be part of the leadership culture for succession planning to become effective.

Hesitance of grooming successors
Many companies have a long way to go for putting in place a succession plan at the top level, which has a bearing on the market valuations of companies, confidence of the business associates and morale of their employees. This is because, many successful business leaders and executives are generally caught up in the daily demands of running a company, give very little attention to what will happen to the company once they retire and sometimes the fear of grooming a successor, who could mount a challenge over a period of time.

Some of them postpone succession planning because the task seems too demanding, while others assume they can wait until retirement is a few months away. In many companies, succession planning is avoided because of the emotional and sticky/thorny issues surrounding succession. For some, it’s simply too painful to imagine relinquishing control and handing it over to someone else.

We have found that while succession planning is important for all types of businesses, it is of special importance for family-run businesses, in which business affairs tend to be closely linked to family members and key shareholders.

Many studies have revealed that less than 25-35 percent of family businesses survive into the second generation and less than 15-17 percent survive into the third generation – these statistics further suggest the importance of succession planning.

Leadership pipeline
Many assume that if they have a five-year strategic plan, they don’t need a succession plan because the new guy who comes in can continue as per the plan. A good succession plan will take into account the business’ future growth trajectory, ownership form and the organisational structure and management.
The plan should identify how the transition from one set of leaders/owners to the next will be managed. Furthermore, it provides a means of transferring a company’s accumulated store of trust, respect and goodwill to new company leaders.

A succession plan is a formal document. Because, failing to plan for business succession can mean significant monetary losses and even loss of the business itself. A senior leader’s intentions about what will happen to the business upon his departure from it are a poor substitute for a formal plan.

To be effective, a succession plan must also be regularly reviewed by the board and updated to reflect company market changes, industry or market developments. Even in the absence of such changes, an annual review would be of immense value to keep a tab of the talent in the company.

Not having one?
A number of crises can befall companies that operate without a succession plan. For example, company leadership can fall into the lap of people who have not been properly prepared for leadership, thus threatening the company’s profitability and endangering relationships with key clients.

In addition to preventing a leadership crisis going forward, succession planning offers many immediate benefits. Succession discussions very often help boards to put together a specific future for their company. Boards often emerge from the succession planning process with a clearer sense of their mission and business goals.
They force discussions around company organisation structures, management and operations. The discussion may lead owners to the discovery that some of the skills, existing structures or practices are no longer effective for the organisation and for its sustenance, even forcing a board to review the firm’s business model and the people running the company.

Rising talent
Most medium to large-sized companies have now recognized the growing importance of leadership development planning, i.e., identifying and grooming employees to move into strategic leadership positions within the company.

However, for this intervention to be effective, companies need to: (1) identify the kinds of leadership competencies the company needs, (2) identify employees with those competencies and (3) use training and mentoring to ensure their readiness.

Preparing key talent for leadership roles is the opposite of crisis management. Rather than waiting until a successful CEO retires or suddenly leaves the firm, thereby creating a talent vacuum, savvy boards start succession and leadership development planning well in advance.

This ensures that someone with the right leadership skills is in the company to take over and the enterprise has several options. This could also mean that if a front-runner drops dead or decides to quit that other options could be pursued.

However, the steps required to prepare an organisation for succession can take several years – and because succession can be the result of a drop-dead situation as well as planned retirement.  Therefore, developing a succession plan is not a task to be put off and to do that, the board should get a good look at the company’s rising talent, to ensure talented managers get adequate exposure in all departments of the organisation.

Companies that don’t put into place a strong succession plan will continue to get the CEOs/leaders they deserve and would also be sacrificing long-term stakeholder value. Therefore, there is definitely a business case for more orderly succession processes.

(Dinesh Weerakkody is a thought leader in HR)

Jun 192013
Dinesh to launch 4th Vol. of ‘In the Best Interest of My Country’ on July 3
Dinesh Weerakkody will launch his fourth volume titled ‘In the Best Interest of my Country’ on July 3, at the Institute of Chartered Accountants of Sri Lanka.

His third volume was published in 1996, the second volume in 1992 and the first volume in 1990.

The new volume has four chapters covering political, economic, HR and management articles and runs into 850 pages. The book also includes interviews with prominent business and political personalities published in the local and foreign media.

Dinesh Weerakkody in his Preface says, “As a fledgling writer in the late 80s, I was greatly inspired by leaders who epitomized morality and spoke the truth even if it meant forfeiting power and the good things which accompany it, that admirable ethic of accountability, the constant encouragement from many loyal readers and constructive feedback from many well-wishers motivated me to put together this current volume in the larger interest of society.”

The book boldly addresses some difficult issues that many ignore because of their complexity but these are so crucial to the fate of the nation. The insights into key national issues are eye openers. There is a clear desire on the part of the author to also share his academic and business experiences, to help professionals in their own drive to deliver greater value to their organisations.

Professor Dave Ulrich at the Ross Business School of the University of Michigan and one of the most influential international thought leaders in HR in his foreword says, “This book will not just be a must read but a must use for any leader who wants insights into how to use innovative ideas in a pragmatic way.”

Julian Birkinshaw, Deputy Dean and Professor of Strategy and Entrepreneurship at the prestigious London Business School, says, “The book provides a provocative and challenging view for leaders in the public and private sectors.” The book will be launched on July 3 and will be on sale from the 5th instant. It is priced at Rs.2000 and will be in aid of strengthening the educational facilities of a university.

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