Searching for a better management approach

Searching for a better management approach

By James O'Hara

JAKARTA (JP): The World Bank produced a development report in
1987 comparing the average levels of per capita income in
developed industrialized countries and low-income developing
countries. The report suggested that the average developing
countries would take 80 years to catch up with current living
standards of industrialized countries.

In Indonesia, it appears that if the approach to managing both
private and state enterprises does not change, the country will
face an almost insurmountable problem of paying back its debts
and increasing its people's standard of living.

The reason for searching for a newer, more appropriate
approach to management was and is the failure of traditional
Western approaches to produce any long-term survivability of
companies.

Over the last 40 years, many supposedly secure firms have
disappeared; 70 percent of Fortune magazine's "Top 100 firms" in
1956 are no longer represented in the top 100. Many companies
identified in Peters and Waterman's book In search of excellence
are no longer considered excellent.

Another management expert attributes this to companies
continuing to do the things they do well without adapting to
changing times.

Yet another, Donald Sull, in an article in the August edition
of Harvard Business Review, stated that many good companies
suffer from active inertia. They continue to do the same things
that made them good, even when environment has changed, and this
eventually leads to a decline in their fortunes. This paradigm is
very appropriate to Indonesia, for the conditions that made many
Indonesian companies good no longer apply. The future will not be
like the past and past experience will not guarantee future
success.

Management in many industrialized countries, and often
developing countries, has long been based on ideas from Taylor,
Mayo, Drucker and Peters. These countries have tried scientific,
psychological, professional and evangelical approaches to
management, all of which are credited with some success. The
result of this, according to Levering in his book A great place
to work, has been a managerial class that is set apart from the
workers.

The traditional concept of management is that managers plan,
coordinate, lead and control the workers while the workers merely
do. Following this, it can be seen that if there is one manager
and 50 workers, in a traditional setting only one person is
allowed to think and the rest follow. This provides about 2
percent brainpower. If all are allowed and encouraged to think,
even if the workers have only utility of 5 percent, the total
brainpower available is 4.5 percent. This is more than two times
the former level. In Indonesia, with its feudal and autocratic
management systems, it is often the case that a senior person
thinks and the rest of the 1,000 or more employees are supposed
to do what they are told. It is an enormous waste of potential
brainpower.

Of course, the argument put forward by many executives is that
the subordinates cannot think. However, all humanity thinks; what
may be in question is the competence or level of thinking. This
being the case, two things are required; first, a clear focus on
what to think about and, second, an encouragement and stimulation
to develop dormant competencies.

"World Class Management" is an approach that is claimed to be
based on human values that promote environments which not only
improve work satisfaction and human development, but also add
value at an increasing rate. Ebrahimpour and Schonberger listed
in 1984 the problems found in developing countries that they
believed could be diminished by such approaches.

These were:

* underutilization of both workers and equipment

* inferior quality

* unreliable and longer lead times

* higher rate of scrap and defects

* poor and inadequate maintenance

* shortage of raw materials

* shortage of skilled workers

* lack of appropriate supervision

* low productivity.

After 26 years, one might argue that these problems still
manifest themselves in Indonesia. While the country has excelled
at building glorious banks and offices, its track record of
making the things that people want to buy is not so good. Most
Indonesians with any spending power want to buy imported
products, perhaps because the products they want are not
available locally or, if available, are of inferior quality.

Local products are bought when they have a monopoly and/or the
imported prices are high due to price protection. Before the
recent economic crisis, foreign products were not much more
expensive than domestic ones. However, this has changed, imports
are more expensive and credit is more costly. In this situation
there is a new impetus for local products. To seize this
opportunity and increase the standard of living, Indonesian
organizations must add real value to what they do. They must
focus on better products and services and less wastage of
resources.

In the past there have been numerous comparisons between
Japanese products and Japanese managed companies. It's enough to
say that the differences in working conditions and productivity
brought about by changing the approach to managing companies has
been taken seriously by many Western companies and countries. In
fact one might argue that the West has taken on board Asian
management values, whereas Indonesia has taken on board the old
discredited Western management values.

It is time for Indonesia to return to Asian management values
and address World Class Management. It is not sufficient just to
copy the ideas or techniques; this usually leads to a frustrating
failure. Understanding of these approaches is necessary to fit
them into the particular culture and time they are to be used in.
Particular care needs to be exercised in copying techniques or
systems from others as most Indonesians' Weltanschauung has been
influenced by 20 years to 30 years of autocratic rule.

To facilitate improvement, management must place its emphasis
on adding value and reducing waste through a clear corporate
mission. Initially the issue of adding value and reducing waste
will not be clear to many companies. As they become more involved
and more skilled in management, the concept of value and waste
will change. The corporate mission should be synthesized to
enable the organization to respond to changes in the environment
and as such should relate to the organization's long-term goals.

Having taken the first step it will become clear that World
Class Management is a continual learning process.

The above concepts are not limited to small, medium or large
organizations; they can be applied to villages, towns, cities and
countries. For example, a social organization may question what
it should be doing that is of value. Is it the provision of
education, health care, nutrition, the building of
infrastructure, banking, administration, manufacturing, policing,
or the development of shopping malls, etc., that are of real
value to Indonesia? Of course, some of these activities may not
add value directly but they may be necessary. The question is,
what should be the focus?

Simply saying, it can be considered that most people would
vote, in a democracy, that education, health and nutrition are
the basis for any country. Without them no country is viable over
the long term. How an organization's or country's limited
resources are best utilized for the betterment of the
stakeholders is a central issue. One answer is to focus on adding
value, reducing waste and continually learning.

The author is an adviser to PT Johara Indah Mulia management
consultant. He has been associated with the management of
enterprises in Indonesia since 1978.

Window: In Indonesia, with its feudal and autocratic management
systems, it is often the case that a senior person thinks and the
rest of the 1,000 or more employees are supposed to do what they
are told. It is an enormous waste of potential brainpower.