Most firms choose loyalty over skills

Most firms choose loyalty over skills

By Simon Potter

BANDUNG (JP): In a recent seminar here a high-ranking official
of the Ministry of Manpower said that most companies in Indonesia
choose loyalty over skills in their decisions to hire workers.

Andi M. Sangadji, director general for training and
productivity affairs, also said that his ministry has modified
its apprenticeship program to help develop a sense of loyalty
among participants.

He did not, however, go into details as to why loyalty is
valued so highly in Indonesia. Of course, throughout the world
companies are seeking loyal employees, but very few would
actually place the value of loyalty over and above skills.

Even the most loyal employee, without adequate skills for the
job, is in fact a liability.

This is true whether the employee is a shop-floor machinist, a
hotel receptionist or a multi-national vice-president. Without
the minimum requirements in terms of skills, he or she will not
be able to perform even the minimum requirements of the job.

So, why do companies here go for loyalty first and then spend
thousands of dollars on training schemes getting their loyal
workers up to speed on the jobs allocated to them?

And why are Indonesian companies willing to accept reduced
output -- and therefore loss of productivity and profitability --
while workers are being trained up?

In industrialized countries, corporate employees used to
believe that their employers would reward their loyalty and good
work with job security, generous benefits and pay increases.
Loyalty was not a prerequisite for a job applicant -- it was
something which was engendered in the employee over time,
encouraged by a mutually-rewarding relationship.

An employee was hired because his or her skills were required
by the company, and was given adequate compensation for those
skills. This formed the basis for the legal contract between the
two parties, as well as an equally powerful 'unwritten agreement'
in which it was felt that 'loyalty' to the company would result,
for those who wanted it, in 'a job for life'.

Yet from the mid-1980s, in response to increased global
competition, unfriendly takeovers, leveraged buy-outs and the
like, corporations began to discard traditional policies on job
security, seniority and compensation.

In a recent survey in the United States, 57 percent of the
people interviewed said that companies were less loyal to
employees today than they were 10 years ago. And employees too,
partly as a result of this, no longer feel the same loyalty to
their companies as they once might have done.

The bond between employee and employer, which was perhaps at
its strongest in the U.S. in the post World War II era when
America accounted for 75 percent of the world's gross domestic
product, and even an unskilled job in a Pittsburgh steel plant
would pay solid middle-class wages, seems to be under immense
strain.

In Indonesia, as always, the situation is somewhat different,
but there are valuable lessons to be learnt by drawing parallels.

Indonesian history has conspired to afford a much higher value
to the abstract notion of 'loyalty' than in the west. Barely 50
years old, the state promotes the idea of loyalty as one of the
fundamental tenets on which society is based. 'Loyalty' is used
to preserve the unity of the state, and the power structures
which embody it.

Loyalty to one's nation, one's racial group, one's family and
one's company is consciously promoted at every level of society.
Disloyalty, be it in the form of a strike in Medan,
demonstrations against the President in Germany or flag-burning
in Australia, is treated as an aberration, something deviating
from the laws of nature and society.

Indonesians are fond of saying "right or wrong my country".

Yet loyalty to a company cannot, in the final analysis, be
compared with loyalty to one's nation. This is because loyalty,
or blind devotion to a company, can often have undesirable
results for everyone.

For example, the laborer who accepts wages below the legal
minimum out of a sense of loyalty is doing a disservice to
himself, his family, his co-workers and his society. As a result,
capital does not filter down to the lower levels of society where
it is needed most.

Indeed it could be argued that this laborer's loyalty to his
family, his society and his nation demands that he press for
better wages or seek better employment elsewhere.

If he chooses to find work with another firm, then he should
be free to do so. There should be no restrictions on his
movement, and no stigma attached to his desire to make a better
life for himself.

All too often, however, there are restrictions on movement.
Individuals are tied to particular companies for a certain amount
of years in return for admission to training programs. Workers
from one area are prevented from working in other areas. And
there are psychological barriers too; all too often individuals
are reluctant to disturb the status quo, to do anything which
would upset their boss, and to take the initiative themselves.

As Sangadji pointed out, loyal employees are highly valued and
often recruited at the expense of better qualified individuals.
As a result, productivity and profitability may suffer, but this
seems to be a price that most Indonesian managers are willing to
pay. Why?

The answer seems to be control. Family firms will employ
relatives to ensure that the business stays firmly in the hands
of the elder patriarchs. Different ethnic groups, such as Chinese
Indonesians, or Bataks from Sumatra, will employ people who share
the same ethnicity, feeling safer with members of their own kind
than with outsiders.

Indeed, many job seekers in Jakarta say that the biggest
obstacle in the job market is that the 'boss' will only hire
those from his own clan. Of course, we should be careful: what
might be labeled nepotism and discrimination in the West is here
considered good business practice.

There are of course many and diverse reasons which account for
the pre-eminence given to loyalty in the employee-selection
process.

It has been said on more than one occasion that firms hire
loyal people before competent people because the Indonesian legal
system is so weak. Should the latter group start, for example,
embezzling funds, the chances of an inexpensive, successful
prosecution are minimal. Much better to begin with a loyal group
of workers in the first place, so that such problems will not
arise.

Loyalty results from many diverse factors and in its abstract
form is something which probably all of us will agree is a
desirable attribute.

Yet questions arise when we begin to consider the object of
our loyalty. Loyalty to one's nation or to an individual or
institution, which stems from genuine respect and admiration, can
be noble. Yet loyalty which comes from a sense of fear is
something which is not so desirable.

In today's Indonesia, though there are of course many notable
exceptions, loyalty in the business world seems to result as much
from the prevailing culture of paternalism, the still-powerful
remnants of feudalism and the whole web of dubious practices,
such as corruption and nepotism, as from any other source.

Employees in Indonesia tend to be loyal to bosses who take a
benevolent, paternalistic attitude to them -- as did the ancient
Javanese kings in relation to their subjects. These kings
demanded unswerving, unquestioning loyalty from their subjects,
and that loyalty was rewarded with advancement and material
recompense.

To take issue with Sangadji, who in the seminar in Bandung
stressed employee loyalty to the company, it seems that employees
are loyal to those individuals within the company who are able to
take care of them.

In conclusion, one should not make the mistake of confusing
loyalty to one's nation and it's development with loyalty to one
particular company. Indeed the two may often be at odds with one
another.

In addition it is not implausible that some owners play on
their employees' feelings of loyalty in order to keep their
working conditions at a minimum.

It is also a mistake for employers to try to force feelings of
loyalty in a employee. If loyalty does not come of its own
accord, it never will. Contracts which state that an employee
must stay with the company for a certain period of years, in
return for the money invested to train that employee, only result
in feelings of resentment.

In the years to come, as the Indonesian economy more and more
comes to resemble those of the developed nations, loyalty will
become something of a bonus, rather than a prerequisite. As in
the West, individuals will be loyal to themselves and their
careers first, and loyalty to the company will be way down on
their list.

Managers should learn to view employees more as equals, or at
least as legitimate stake-holders in the business. If employees
are satisfied with the conditions offered by the company, they
will be loyal. If not, they will seek to move.

And if they move, management must make the most of the
opportunity to investigate why they move and make the necessary
adjustments. Management should also take the opportunity to
employ someone who has the appropriate skills and who is willing
to exchange those skills for the remuneration package offered by
the company.

The writer works at the Indonesian Institute for Productivity
in Jakarta.