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.