Indonesia's micro-entrepreneurs know best business practices

Daniel Kingsley, Jakarta

I recently had the pleasure of sitting for three days with a fascinating group of individuals; they included well-connected media and bank presidents, well-respected academics, newly installed government officials with backgrounds as fighters for human rights, and...some extremely happy and successful micro- entrepreneurs.

The most surprising thing relaxations to emerge from the group was not the great success stories of the micro-entrepreneurs and their abilities to grow businesses from virtually nothing, and to have a bifocal, social assistance and profit motive rolled in to one, view of their business.

The surprise was in the conversation and enthusiasm that the micro-entrepreneuners' stories inspired in the better educated, informed and more successful participants who were judging the event.

This was during the judging of the UN sponsored, "Year of Micro-Entrepreneur" award selection process. The criterion was to identify micro-entrepreneurs that were successful and have had a positive impact on their physical or social environment. Not all of them had, just as not many larger businesses have such considerations, but it was amazing to witness the degree to which most of them were aware of their interaction with the community beyond the "rules" of civil society, and the degree to which they incorporated their activities with this environment.

It was discussed and noted by each of us, and in isolated conversation that this best business practice that was clearly consistent with the successful enterprises, was sorely missing at the corporate level, and for good reason. Corporations have shareholders and are accountable to them, they move freely through regions, communities and countries by having established good relationships with the government and civil society, and concern themselves with compliance.

Given no rules on compliance to assisting in social capacity building, it is not a good business practice to impact the profitability of the shareholders by compromising the goal of maximum profitability.

The goal of the micro-entrepreneurs is profitability as well, and it is a motivation for them to incorporate their activities with the community, because they do not have the resources to move between communities, regions and countries, but are bound by their limited resources to their community.

Therefore, they need to create stability in that community through goodwill and they need to rely on their community for the human resources to run their business. At the same time, the corporation has the resources to pay for the licenses and the minimum wage, and the government required compliance issues.

So, why were we left with lingering questions about the differences in business "attitude" between the micro- entrepreneurs and corporate managers? He had shareholder, and he did what it takes to maximize profits, and they had only there community, and they did what was necessary to survive in it and grow their business at the same time.

But, isn't it a little premature to look it this way? If the world arena is just a community with different rules I different places, wouldn't it be logically that the same principals for success would apply to both socio-economic groups.

For instance, the women in East Java employing handicapped workers, who tirelessly goes to Bali in search for orders, is in an entirely different community -- with different rules- than the guy in Central Java who is teaching his competitors a better way to grow a crops, even though they are going to become his competitors.

Yet, they both see the value in assisting their community, because it will reduce the over-all risk of their doing business. In the one case, the idle handicapped workers can be taught to perform the necessary tasks to satisfy labor requirements, while the increased production of the crop farmer will fulfill the high demand orders that attract the larger buyers. Each entrepreneur is attempting to the requirements of his/her business in the respective sector and geographic location.

So, after scratching our heads...we still don't get it. These supposedly forward thinking and well educated jurists. However, if we consider that perhaps the micro-entrepreneurs, with their high level of risk, must incorporate risk management into their business plan, then it begins to make sense. They have much more to lose, e.g.- their livelihood, if they don't succeed and therefore need to cover all aspects of risk in their management of the enterprise.

They are also operating under particularly restrictive and expensive conditions in an Indonesian economy that penalizes the smallest enterprises through a selective process of enforcing compliance costs. There is not room for error in managing their risk. At the corporate level, risk management is a word, but where is it itemized in the bottom line statement? Shouldn't these risks be handled proactively, just as the micro- entrepreneur handles them?

We understand that the Global Corporate Community of multinationals with shareholders, and certainly the local business elite have never adopted such principles.

Yet, how often have we seen bad press, initiated by a local environment issue, disseminated globally in this electronic age, result in a loss of capitalization of hundreds of millions of dollars pro-actively handled? Is it possible that the costs for "damage control" management to deal with the bad publicity would have been more than enough if it had been properly managed from the beginning in the form of community communications and interaction?

The entrepreneurial sector in this country is operating at the performance level so high, and in such a calculating manner, that it is ready to explode once the simple tools of finance accessibility and a proper education system are implemented.

These small businesses operate as representatives of good business practitioners because they have created a well-led organization (agreed, small as easily manageable) that can elicit optimal value in all its relationships. Perhaps this is a best business practice that has had an influence on increased profits and enterprise growth of many of those finalists.

The promotion of good of business leadership, no matter how small, will always be a worthwhile activity and lead to risk managed growth and bottom line compliance, sorely needed given the current economic environment in Indonesia.

The writer was a member of the jury to choose Indonesia's "UN Micro-entrepreneur of the Year".