We asked 82 large-cap and global companies to take a broad look at effective they have been. "Winning In Indonesia" outlines the challenges faced by them and how they are coping in this fluid and exciting market.
Read more to understand what "Winning In Indonesia" requires.
What every multinational company must know about succeedingin Indonesia.IndonesiaWinning inMay 2013
ContentsAgainst all oddsDesperately seeking talent24812Square pegs, square holesFilling the leadership pipeline14Fitting the jigsaw17Winning in Indonesia: Do you have what it takes?18About the survey
3Indonesia is a long-term commitment andinvestment for Holcim.There is no denying thatit’s taken years of hard work and determination –establishing relationships with government andlocal communities based on mutual trust and co-operation - but I don’t see any other way around it ifreal success in Indonesia is what you want.“”Coping well Still strugglingDealing with corruption Shortage of skilled workersEstablishing relationships withgovernment & politiciansShortage of local managersDealing with legal framework Lack of leadership skills amongmanagersHaving a clear strategy for Indonesia Aligning operating model to businessobjectivesAdapting to local customer needs Clear link between compensation andperformanceFigure 1: Challenges of doing business in IndonesiaSource: Hay Group survey, 1Q2013Eamon Ginley, CEO andPresident Director of PT Holcim Indonesia Tbk
5Figure 2: Attrition rates in Indonesia2005 2006 2007 2008 2009 2010 2011 201213.012.011.010.09.08.07.06.0Employeeturnoverrate(%)8.0 126.96.36.199.611.410.910.6Source: Hay Group PayNet Indonesia, 2012Indeed the pain of the shortage is being felteven now. Our survey found companiesare hit by a double whammy at one end,the lack of skilled workers to perform morevalue-added tasks on the shop floor and atthe other end, an acute shortage of goodIndonesian managers with the right technicaland management competencies. This is thepotential quicksand that will stymy MNCs’growth ambitions and strategy for Indonesia.Intense talent competition in recent yearshas driven attrition rates above 10 percent(Figure 2).
7Moreover, with Indonesia’s legal age ofretirement currently set at 55 -- prime timein many countries -- this will have severeconsequences on leadership succession inan already-strapped talent market. With themean age of senior and middle managersFigure 3: Average age of employees in 2012Clerical/ Junior Middle SeniorProduction management management management6050403020100AverageAge(%)5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2328343536353535373838404243454647474848Source: Hay Group PayNet Indonesia, 2012hovering above 42, more than half of theleadership team will be retired by 2025(Figure 3). The leadership vacuum will notbe easily filled, given the current shortage ofskilled managers and professionals.
9Indonesian graduates prefer to work overseas – inSingapore, Australia, USA.This means that those whoremain in the countary are very much in demand.Their high demand and short supply result in quickstaff turnover in companies, with them securing acorresponding 25 to 30 percent salary increment witheach move. But paying more has not alleviated theshortage over the years. In fact, the opposite seems tobe true: talent now expects bigger salary increases asa matter of course.”“Rully Safari, Director of HR – PT HolcimIndonesia Tbk
13Global top 20 Top 10 Asia indonesia100% 97%79%95%87%51%100%90%80%70%60%50%40%30%20%10%0%Employees are givenassignments or projectsthat stretch their capabilitiesSenior Leaders personallyspend time activelydeveloping othersLeadership developmentprograms better enableemployees to deliver ongoals/strategies95%77%71%Figure 3: Grooming the next generationSource: Hay Group’s Best Companies for Leadership 2011
15Armed with these long-term objectives anda business plan, an operating model can bebuilt to support the execution. And this iswhere most companies run into quicksandespecially in a fluid and dynamic market likeIndonesia. Veteran managers will admit thatthe most frustrating item on their corporateagenda is fitting the operating structureto the company strategy. The process canbe time-consuming, confusing and oftenperplexing.And yet it need not be insurmountable ifwe start with the premise that jobs are thebuilding blocks of organizations. Take thecomplicated business of post-acquisitionintegration, something which we will seea lot more of in Indonesia as the marketconsolidates. On behalf of a food andbeverage client in Indonesia, we recentlyanalyzed a target for acquisition purposes.An interesting finding was that the target’sR&D department was not a truly researchand innovation centre, unlike our client’s.The target’s R&D was focused on tweakingproducts and packaging to suit local tastesand helping out with market development.Our client commented that this was usefulinformation to have at the pre-merger stage.If they had taken the target’s organizationstructure at face value and combined bothR&D departments, the result would havebeen “an unmitigated disaster”.
17Winning in Indonesia: Do you have what ittakes?Indonesia’s future is bright and exciting. But the mood is temperedon the ground. Our survey has shown that companies are dealingwell with the external challenges of winning in such a dynamicmarket. In fact, many like Unilever, Nestle, Mercedes Benz andHolcim have thrived and become stalwarts in Indonesia.However, our research has shown that manyMNCs in Indonesia continue to strugglewith people and management issues. Infact, managers and leaders who are new tothe Indonesian market often wonder whythe simplest of day-to-day tasks seem totake a disproportionate amount of effortin Indonesia. Whether it is obtaining anemployment visa for a foreign employee,filling sales pipeline or hiring a local businessdeveloper, success in Indonesia requirespatience, a long-term game plan and a goodcorporate citizenship programme.However, these obstacles are notinsurmountable, if business leaders pay closeattention to building institutional strength.In fact, the management of a company’s poolof talent is too important to be left to theHR department alone and has become theresponsibility of the CEO. Nowhere is thismore true than in Indonesia.
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