Reengineering of organizations

Reengineering of organizations

By Muhammad Sauri Hasibuan

JAKARTA (JP): The law on regional autonomy stipulates that
regions should be able to take the initiative to solve their
problems, without waiting for a decision from central government.
Power and information, the two main elements needed to settle a
problem, now rest with the regions.

But what does a region have as a basis for taking these
measures? The main problems that regions encounter include the
need to increase income, and reviving regional small and medium
scale (SME) businesses.

To effectively implement regional autonomy in empowering SMEs,
the government must create an administrative organization capable
of quick, flexible, integrated and innovative action.

Present administrations lack the ability to take rapid,
flexible, integrative and innovative action because of their
hierarchical structure.

The highly rigid structure makes it difficult to come up with
the characteristics required to deal with rapid changes, and to
ensure improvement in their services, quality, costs and speed.
These changes are essential in order to overcome cumulative
problems and promote national competitiveness.

This requires organizational overhaul, or "organizational re-
engineering", which means that an administration in a particular
region must determine its own vision and mission in tune with the
needs of locals.

Such re-engineering means that the processes involved should
be reviewed and replaced by those needed to meet local people's
needs and to respond to continuous changes in the region.

This should lead to doing away with the highly hierarchical
nature of the organizational structure. An overhaul of the South
Jakarta administration, for instance, would cut the current eight
levels of its secretariat to three or four.

The regional administration must facilitate human resource
investment. First, through discussions, business leaders should
be made aware of upcoming challenges. Second, the administration
should provide financial aid to ensure the ability of small and
medium enterprises to overhaul their organizations.

Third, even if a business is located in a district or a
village, in principle it must be oriented to the global market.
Of course it must meet the required quality standards and the
like. Such SME businesses will need investment to ensure that
they have the right connections to the global market.

Business people must also clearly prioritize the market and
consumers' logic as a source of internal changes. Aid from the
regional administration to these businesses must aim to ensure
that business organizations can undergo re-engineering and can
later be fully oriented to the logic of the market and consumers.

Changes in administrative organizations should significantly
reduce transaction costs associated with licenses and other
needs, which should lean toward maximum service provision from a
regional administration for SMEs within its territory.

What is also important is creating a conducive regional
environment to enhance the space for SMEs to enter business: they
should not face barriers such as monopolies.

The cost of raw materials and their availability, and the cost
of land and sites for business must be within reasonable limits.
Sluggishness in business as a result of the crisis has resulted
in drastic increases in the rate of unemployment. Therefore, the
government and the business world must empathize with these
unemployed people by forging cooperation to empower SMEs, as this
sector absorbs a significant proportion of the workforce.

The writer is an economic observer and assistant manager at
the Ernst & Young Consulting firm in Jakarta.