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.