Is there an Indonesian style of management

1
Is there an Indonesian style of management?

• Week 8

2
A bit of economic data

•    2000  2001  2002  2003 
• GDP per head ( at PPP) 3,055 3,200 3,330 3,490
• GDP ( real change pa) 4.93 3.47 3.69 4.1
• Labour costs per hour (USD) 0.27 0.28 0.37 0.47
• Recorded unemployment () 6.08 8.1 8.3 8.7

3
Geographic dispersion
4
Bit of background

• Indonesian archipelago
• 13,000 islands
• population around 200,000,000
• over 200 languages dialects
• Historical development
• Pre-colonial Chinese/Arab/Malay cultural
  diversity
• Dutch colonial effect on small part of
  population
• Japanese occupation (1942-45) promotion if
  Indonesian language
• Independence 1947
• Erratic development path up to 1965
• Post 1965 5 year plans (repelita)
• Aimed at stabilisation industrialisation

5
Is there a Indonesian management style?

• Munandar (1990)
• Indonesian managers today tomorrow
  International Journal of Psychology
• International acculturation process
• Considers national-international level
• Welfare state through industrialisation
• Industrialisation process encouraging FDI

6
Middle management traits

• Indonesian managers (middle management)
• Paternalistic
• Little information sharing
• Dont encourage subordinate participation
• Subjective
• Less analytic

7
A set of traits

• Applying Hofstedes analysis
• Collectivist
• Accepting of inequality
• Tolerant and non- aggressive
• Not particularly ambitious or competitive
• Danajaya (1985) reviews successful unsuccessful
  managers
• Success pragmatic primary value orientation
• Less successful operative values relating to
  (e.g.) prestige/dignity
• Suggests successful managers operative values
  equivalent to those values in successful managers
  elsewhere

8
Tomorrows manager today

• Munandar argues that the Indonesian manager of
  tomorrow needs to develop 4 strategies
• Attention to vision
• Meaning through communication
• Trust through positioning
• Deployment of self through positive self-regard
• Knowledge of ones strengths
• Capacity to nurture develop those strengths
• Ability to discern the discrepancy between ones
  strengths weaknesses the organisations needs

9
This was 1990.Emerging managers now?

• Heuer et al (1999) studied convergence of
  Indonesian managers to US norms along the
  individualism/collectivism
• The power distance parameters
• Found no statistically significant difference
  between scores for Indonesian US managers
• But sample used MBAs
• Cannot extrapolate to all managers
• Convergence because
• Indonesian business environment in state of flux
• US business environment relatively stable
• Suggests impact of western FDI/management
  practice within business environment

10
An Englishman abroad

• Berry et al. (1988) have suggested 3 different
  basic modes of adjustment
• Reaction mode
• expatriate tries to change the environment rather
  than his own behaviour
• Integration mode
• expatriate changes his behaviour in order to
  reduce the conflict with the environment
• (problem-focused coping strategy)
• Withdrawal mode
• expatriate tries to remove himself from the
  conflict situation

11
A Finn abroad

• Suutari et al (2002) studied expatriate managers
  adaptations in Indonesia
• The results of the study indicate that all
  expatriate managers actively adjust their
  leadership style when they lead foreign
  subordinates
• They use integration mode (in varying degrees)
• Side effect expats views on Indonesian workers

12
The (sad) case of Bank Duta in 1989

• Desire not to deliver bad news
• Subordinates do not wish to inform seniors of bad
  news
• Manager of dealing room found US20 million loss
  in FX trading
• Didnt say anything
• Two days later US70 million loss
• President-director only told before scrutiny of
  year-end reports
• He did not inform the board
• Told dealing room manager to keep quiet
• Subsequent loss was US419 million

13
Cultural dilemmas

• Assertiveness
• Conceal negative feelings
• Play down positive feelings
• Are typically non-assertive
• Yes means Yes (or No)
• Believe to say No invites conflict
• Therefore Indonesians will say yes when they mean
  no.
• How do you tell what they mean.
• Understatement
• Indonesians will not give their opinion unless
  invited to do so

14
Gorblimey! What does this all mean?

• Despite acculturation theory
• Despite convergence theory
• Despite MBAs
• Worker expectation of management is
• Variable and
• Location/culture specific
• This must have an effect on
• How workers are managed
• How expats are prepared
• The validity of a universality concept of
  management
• There are certain required management traits
• Contingency management seems best paradigm

15
Vance Paik (2002)
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Role of the JV in understanding management

• Perks Sanderson (2000)
• Study of JV process between Lucas (UK) 2
  Indonesian partners
• Exploratory stage Strategic intent
• State long term stability sustainability
  (Repalita 6)
• Indonesian SOE long term technology
  transfer/skills, etc
• Indonesian private company market opportunity
  in aerospace
• Lucas low cost high precision manufacture

17
Cultural considerations

• Study puts emphasis on meetings and negotiations
• Consensus
• Slowness
• Attention to detail
• Key components
• Each party had gains to make from JV
• Success (18 months start to finish) accomplished
  by UK negotiators being
• Senior executives
• Adapting to Indonesian negotiating style

18
Positive advantages at implementation

• Indonesian partners ensured collectivist
  decisions finalised
• So start-up operations could proceed smoothly
  without hold-ups conflicts so often found in
  Western companies
• All relevant stakeholders consulted early on so
  decisions seen as balanced and high quality

19
SOE sector

• Still many SOEs
• Mostly former Dutch companies which were
  nationalised
• Recent attempts at reform
• Privatising non-profitable SOEs
• Management is limited restricted authority
• Rise of conglomerates (konglomerat)
• Driving force behind Indonesian economic
  development
• Mainly Chinese owned
• Of top 25 only 5 owned by ethnic Indonesians
• Adopting new management techniques
• Reliance on informal relationships between owners
  and associates

20
SME sector modification

• ILO figures suggest 1997 crisis caused
  displacement of 5.4m non-financial sector workers
• Many re-absorbed in informal sector
• Fundamental re-profiling of sector
• Throws light on government policy failure
• Provides analysis of SME sector requirements to
  provide economic growth potential

21
Reactions by small business sector to crisis - 1

• Micro-Enterprises Level
• Stop the business
• Change the occupation (for example, become a
  trader)
• Reduce the quality of the product by
  changing/reducing use of expensive raw materials
  
• Change the product

22
Reactions by small business sector to crisis - 2

• Larger Small Industries
• Reduce the scale of production or working hours
• Keep the price of output as before while
  decreasing the size of goods produced
• Increase the price of output by 20-25 percent
• Diversify the product
• Shift the imported raw materials towards local
  ones
• Maintain production using old stock of raw
  materials
• Change the market orientation from domestic to
  export
• Pay back bank loan and try to substitute it with
  funds from other sources

23
Import reliance

• Export oriented SMEs more able to resist crisis
• Spotlight of 97 crisis suggests
• Many SMEs in Indonesia are very dependent on
  imports for their raw materials and other inputs
• Even in traditional manufacturing sub-sectors
  such as
• textiles
• garments
• footwear

24
Policy failure

• Tambunan (2000) argues
• Failure of Replita to address midstream
  industries
• The effect of skewed micro economic development
  is that
• Downstream industries must rely heavily on
  imports of capital and intermediate goods,
  processed raw materials, and other input.
• This leaves SMEs ( larger downstream industries)
  very vulnerable to disruptions to import supply

25
Policy review

• Tambunan (again!) (2005) reviews the state policy
  of developing encouraging
• SME clustering
• Identifies 3 types of cluster classification.
• Artisinal clusters
• dominant clusters in Indonesia - indicating that
  the process of clustering in the country is still
  at an infant stage
• This type of cluster displays many
  characteristics of the informal sector
• Level of productivity and wages being much lower
  than those of clusters dominated by SMEs.

26
Cluster classification

• Active clusters
• developed rapidly in terms of skills improvement
• technological upgrading and
• successful penetration of domestic and export
  markets
• Advanced clusters
• many active clusters are more developed and
  become more complex in structure

27
Internal/external clustering networks
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Public policy

• Important for public policy perspective.
• Strategy makes it more effective and more
  efficient for government to provide technical
  assistance and general facilities to a group of
  firms in one place than to individual firms in
  dispersed locations
• But
• Cluster development policies in Indonesia have
  not been successful
• Most failures can be attributed to
• neglecting cluster linkage to markets
• neglecting or even eroding SMEs
  self-organization potential
• limited support from local government and private
  organizations