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.