International Journal of Manpower

Human resource management as competitive advantage in the new millennium: An

Indonesian perspective
Ahmad D. Habir Asti B. Larasati
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International
Journal of Human resource management
Manpower
20,8
as competitive advantage in
the new millennium
548
An Indonesian perspective
Ahmad D. Habir
Indonesian Institute for Management Development, Jakarta, Indonesia
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Asti B. Larasati
Organizational Consultant and Trainer, Jakarta, Indonesia
Keywords Indonesia, Management, Participation, Empowerment,
Human resource management
Abstract One strand of conventional wisdom is the urgent need for human resource
management in Indonesia to improve to world standards so that the Indonesian corporate sector
can survive in a globalized economy. Another strand accepts the need to improve to international
standards but argues that such improvements should be based on Indonesian conditions.
Indonesian management is traditional, patrimonial and hierarchically oriented, and international
practices like empowerment, participation and incentive orientation are irrelevant or, at best,
need to be adjusted to and are secondary to Indonesian indigenous characteristics. There is a
dearth of empirical research in Indonesia that could support either strand. This article presents
three mini-cases to argue that human resource management in Indonesia is a complex process
with both national and international influences. The cases suggest national conditions need not
hinder the adoption of international best HRM practices focusing on participation, empowerment
and incentives leading to competitive behavior.

International Journal of Manpower,
Vol. 20 No. 8, 1999, pp. 548-562.
# MCB University Press, 0143-7720
Introduction
Of all the countries affected by the Asian crisis, Indonesia has suffered the
most. After experiencing almost three decades of economic growth, Indonesia
began a downward plunge beginning in mid-1997. In early 1998, the US dollar
rose to four times the rate before the crisis began. Prices increased drastically
(for some goods as much as 300 per cent). By the end of 1997, unemployment
was estimated to reach between 8 million and 13 million. The number of people
under the poverty line increased to 80 million, around 40 per cent of the total
population of Indonesia (Tjiptoherijanto, 1999, p. 2).
These economic conditions were exacerbated by the accompanying political
crisis; the riots and protests that triggered the resignation of President Soeharto
and the ascendancy of President Habibie and an interim government that has
lacked legitimacy. The parliamentary elections have been relatively peaceful
and the rupiah is strengthening but still vulnerable. But as of this writing, the
selection of the new president remains uncertain.
Whoever becomes president will inherit a business sector that is essentially
bankrupt. Banks have collapsed. Debt-ridden businesses are unable to obtain
credit. The economy has contracted by 15 per cent. Large numbers have been
 laid off. Early retirement packages and other compensation packages have had Human resource
to be devised to streamline organizations further, all of which has put management
enormous pressures on all areas of the management, including the human
resource function, to survive the crisis.
Human resource management, however, has historically not had an
important role in Indonesian management. It has traditionally been regarded as
a personnel function, almost totally administrative in orientation. Even in this 549
capacity, human resource management is not regarded highly. A survey
undertaken in 1995 showed managers' perceptions of the human resource
audits, human resource development and planning, employee orientation, and
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salary system of their respective companies were negative (Budihardjo, 1996).

This state of affairs has led to many calls for a human resource function that
would prepare companies and Indonesia to face the future (Hess, 1995;
Budihardjo, 1996; Sumampouw, 1997). In this prescriptive view, human
resource management should therefore have a strategic orientation. Other HR
practices that need to be adopted within the strategic orientation echo western
human resource trends such as: a long-term orientation, continuous learning,
knowledge creation, a team focus, empowerment and an integration of HRM
with the strategy of the firm (Budihardjo, 1996).
Some argue, however, that culture constrains the adoption of such practices.
Based on the Indonesian scores of his cultural dimensions (individual/
collective, power distance, uncertainty avoidance, and masculinity/feminity),
Hofstede characterized the Indonesian work context as, among others:
. The relationship between employer and employee as moral rather than
calculative, implying mutual obligations of protection from the
employer (irrespective of the employee's performance), and loyalty
towards the employer from the employee.
. Employees having strong obligations towards relatives.
. Relationships taking precedence over task.
. Having a strong need for harmony and the preservation of face.
. Paternalistic.
. Acceptance of status differences.
. Reluctance to plan ahead (Hofstede, 1982; 1983).
Such traits do not lend themselves to the needs of a strategic human resource
management that has empowerment or participation as a philosophical base.
However, cultural characteristics in themselves could be used as a competitive
advantage (Hoecklin, 1995; Ciptono, 1998). The challenge here is to identify
those cultural traits that could help to provide competitive advantage and to
integrate them effectively into the workplace.
Another challenge is to be able to separate cultural traits particular to a
population from the universal traits that may have as much validity, if not
more, in creating effective human resource management. For example, an
 International Indonesian development programme in Indonesia that prepared poorly
Journal of educated farmers to use integrated pest management (IPM) methods largely
Manpower succeeded through empowerment and knowledge creation and dissemination
for informed decision making and through contingent incentives (Useem et al.,
20,8 1992).
The program involved a staff of 2,000 trainers by the early 1990s and a
550 curriculum emphasizing information analysis and management decisions to
train as many as 50,000 farmers per growing season. The results showed
that:
pesticide applications were reduced by more than 60 per cent;
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. pesticide use depended more on field decisions, less on prescriptions;

. small landholders were as likely as large holders to master IPM
techniques;
. IPM-trained farmers experienced no loss in rice yield and significant
savings in pesticide expense;
. IPM-trained farmers sought to share the new information and skills with
other farmers.
The training task was to make farmers become their own field evaluators and
scientific managers, a form of information empowerment. Field agents became
managers of local knowledge creation. Training was interactive and non-
directive. Participation was a key component, including the power to control
farming inputs. Such participation became fully realized when farmers
acquired information, decision-making abilities and incentives to exercise
effective control. The researchers asserted that this conclusion from the
developing world was consistent with studies of innovative business
organizations in the developed world.
We would also argue that participation, bottom-up decision making, local
knowledge creation, and incentive-based HRM strategies could apply equally
well to Indonesian business entities. Three mini-cases, the Sinar Mas Group,
the Astra Group, and PT Rekayasa Indonesia, a state enterprise, are presented.
These cases were selected not because they are representative of practices in
Indonesia, but because they suggest the variety of organizational strategies
possible in the Indonesian context. The examples are also indicative of
innumerable fermenting micro processes underlying and influencing larger
trends. These processes are often lost in macro analyses.
Sinar Mas and Astra are major Indonesian conglomerates that, as a group,
have dominated the Indonesian economy. Because their growth has been fueled
by easily available credit, they have also received their share of blame for
causing the present economic crisis through over-borrowing to the point of
business collapse when the currency fell.
The other large economic group is the state enterprise sector. PT Rekayasa
Industri is an engineering and construction state enterprise. Despite being in a
 sector noted for its inefficiencies caused in part by bureaucratic interference Human resource
from government, Rekayasa has succeeded in developing an innovative management
knowledge-based management system.
Information on the companies was obtained from interviews with senior
managers and secondary sources. A quick summary of the findings is given in
the Appendix.
551
The Sinar Mas Group
The Sinar Mas Group (SMG) is usually ranked as the second or third largest
Indonesian business group. Eka Tjipta Widjaja began his business as CV.
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Sinar Mas in the 1950s. It is now a diversified international business group

focussing on four core businesses: pulp and paper, agribusiness, food and
consumer products; financial services; and real estate and property
development. SMG employs 180,000 people of different nationalities both in
Indonesia and abroad. It has a geocentric approach, that is, choosing the best
option, regardless of nationality, to recruiting people, raising capital, locating
production centers, determining sourcing, marketing products and formulating
a global strategy (Pawitra, 1999).
Sinar Mas considers itself a world class organization that invests and owns
or controls value added activities in different countries. While coordination is
carried out from central headquarters such as Jakarta and Singapore, affiliates
and subsidiaries in foreign markets are allowed latitude in adjusting operations
to local circumstances.
The pulp and paper division, operated through its holding company Asia
Pulp and Paper Company Ltd. (APP) based in Singapore, contributes
approximately 50 per cent of the group's turnover. It is the largest fully
integrated pulp and paper manufacturer in Asia outside Japan, having a pulp
production capacity of 2 million tonnes and paper and packaging capacity of
3.4 million tonnes. It exports paper to more than 40 countries. The division
operates other mills outside of Indonesia, such as in China, India and Malaysia.
SMG's Agribusiness Division, a leader in edible oil and fats, operates
plantations, mills, and refineries in Sumatra, Kalimantan and Irian Jaya.
SMG's real estate and property division is one of the largest real estate
developers in Indonesia. Its activities also span across Malaysia, Singapore,
China and the USA. The property division as well as the agricultural are
operated through Asia Food and Properties Ltd in Singapore.
Bank International Indonesia (BII) is the flagship of the financial division. It
is involved in numerous joint ventures with an array of national and
international partners.

A learning organization? Impact of changes on HRM policies and practices

In order to continue its rapid development, a strategic human resource option is
to make Sinar Mas a global learning organization. This would entail
organizational learning across national borders, across cultures and across
nations. Sinar Mas would have to benchmark its efforts and performances
 International against other successful global learning organizations. Such organizations are
Journal of able to utilize the combined energies of individual and team learning,
Manpower organizational learning, and global learning. In short, these organizations
recognize the need to identify, protect, and maximize their knowledge-based
20,8
assets or intellectual capital globally.
Sinar Mas is still at the beginning stages of developing such an
552 organization. Its development will be based on current HRM principles and
practices such as:
. The molding of core corporate values through the key success factors as
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enunciated by the founder-owner-chairman of Sinar Mas, Eka Tjipta

Widjaja: hardworking, thrifty, honest, loyal, perseverance, and zealous.
. The Management by Olympic System (MBOS) introduced by Teguh
Ganda Wijaya (President Pulp and Paper Division) and Franky Oesman
Widjaja (President Agribusiness Division) is the basis of the group
corporate culture. Targets are set to push organization improvements
and Olympic rewards are the incentives to achieve the targets. The
MBOS is a performance improvement program that links compensation
to achievement.
. Establishing teams to support the performance improvement program
(MBOS) and the Reaching the Sky (management innovation and culture
change program.
Despite such ongoing human resource efforts, aided by international
consultants such as McKinsey, Sinar Mas has still a distance to go in reaching
its goal of being a world class company. It is still influenced by the family
culture of the Widjaja family. Coordination and networking between companies
within the group is still limited. The family, expatriates and ethnic Chinese
Indonesians dominate top management. In these areas, the group lags behind
another large business group, the Astra Group (Pawitra, interview, August 2,
1999).

The Astra Group

The Astra Group has won recognition as the most well managed and
professionally run Indonesian business group. It has, to the largest extent of
any Indonesian business group, separated management from ownership. The
corporate culture is suffused throughout the group. And there is a high level of
coordination within the group in such areas as strategy formulation and
implementation, human resource management, and environmental
management. Astra has also followed a non-discriminative employment policy
so that, different from most business groups (both Chinese Indonesian or
indigenous pribumi), top and middle management is a blend of pribumi and
Chinese Indonesian. The current CEO is pribumi and a woman as well. Even in
western countries, it is rare to have a woman CEO of a large business group.
 Rini Soewandi, a former vice-president at Citibank in Jakarta, is credited with Human resource
successfully steering Astra through debt restructuring negotiations, the first management
Indonesian business group to do so since the crisis struck (Putranto, 1999).
The Astra Group has three main features (Sato, 1996). First, it is the largest
automaker in Indonesia with over 50 per cent of the market. Its joint ventures
with Japanese automobile manufacturers provided the business foundations in
the manufacturing of automobiles and machinery and influenced its 553
management development.
Secondly, it was initially a family business founded by William Soeryadjaya.
The holding company, PT Astra International, was owned by the family until
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the end of 1992. The family was forced to sell its shares because of the
bankruptcy of a separate family business. As a result, PT Astra International
and its affiliated companies, apart from the founding family's ownership, is
held by multiple owners, including Indonesian government financial
institutions, domestic private capitalists, and foreign firms.
Third, the Astra group is a pioneer of Indonesian modern management. The
Astra Group introduced the divisional system and the holding company
system in the 1970s and ``total quality control'' (TQC) in the early 1980s. Astra
was the first Indonesian business group to have its holding company listed on
the domestic stock market. It has a high reputation domestically as the most
professional business group in Indonesia. It has been recognized
internationally in being selected, for example, as the best Indonesian company
on the basis of comprehensive criteria (Far Eastern Economic Review, 1996)
The modern management at the Astra Group arose from the management
vision and philosophy of the founding family. The existence of this
management system enabled the Astra Group to survive the collapse of the
family ownership and now to survive the economic and political crisis that
began in 1997.

Overview
In 1998, the Astra Group employed about 100,000 employees, had consolidated
net sales of Rp 11.2 trillion (approximately US $1.4 billion at an exchange rate
of US$1:Rp 8000) and total assets of Rp 22.3.2 trillion (approximately US$ 2.8
billion). This compares to Rp 12.2 trillion (but approximately US$ 4.8 billion at
an exchange rate of US$1:Rp 2300) in 1996 and total assets of Rp 16.7 trillion
(approximately US$ 7.2 billion). In terms of sales, the group usually ranks with
the Sinar Mas Group in the Indonesia business group rankings, behind only the
leader, the Salim Group. PT Astra International has six divisions:
(1) automotive, including cars, motorcycles, and components;
(2) financial services, mainly automobile financing;
(3) heavy industry;
(4) infrastructure;
(5) agribusiness;
 International (6) other division, including information technology and wood-base
Journal of operations (Astra Annual Report, 1998).
Manpower
Management system
20,8 Astra total quality control (ATQC) was introduced in 1983. Total quality
control (TQC) refers to comprehensive quality control, aiming to raise not only
554 quality control at the production site but also the quality of non-production
tasks such as sales, accounting, and human resource management.
William Soeryadjaya explained his management philosophy in 1975, ``From
the founding of Astra International to the present, we have always continued to
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adhere to one philosophy. That is, the company can grow and develop
successfully if all personnel are diligent, cooperative with each other, and have
a sense of belonging to the company, and if all the personnel, the public, and the
shareholders can perceive and enjoy the fruits of the company's success'' (Sato,
1996, p. 263). Subsequently, in 1983, the same year ATQC was introduced, the
four principles (Catur Dharma) of the Astra Group were promulgated. These
were to: be an asset to the nation; provide the best service to our customers;
respect the individual and develop teamwork; and continually strive for
excellence. Japanese management ideas have influenced both Astra TQC and
the four principles of philosophy. But through the process of being applied by
the Astra Group, they have become Astra local knowledge. The basic
framework of the group's management system has endured to the present and
has sustained them in the present time of crisis.

Crisis and strategy

Like all of corporate Indonesia, Astra suffered major setbacks because of the
crisis. This was caused by a combination of high depreciation of the Indonesian
rupiah, high domestic interest rates and tight liquidity, weaker consumer
buying power, particularly for automobiles, and continued uncertainty in the
economic, social and political spheres, all of which resulted in a net loss of Rp
2.4 trillion in 1998 compared to a loss of Rp 279 billion in 1997. However, the
results would have been worse if not for the increase in exports, in particular in
agribusiness, information technology and consumer goods, and the wood-base
group.

Astra Group recovery program

Astra Group is implementing three strategies to ensure the survival of the
company:
(1) Efficiency measures of:
. salary cuts throughout the organization;
. not extending contract workers;
. voluntary retrenchment for permanent employees;
. early retirement program;
 . closing of non-strategic distribution outlets; and Human resource
. enforcement of all routine cost-reduction programs. management
(2) Redefining business strategy to focus on:
. strengthening core competencies in auto distribution and after sales
services;
555
. increasing export activities utilizing existing capacity together with
partners; and
. strengthening the natural based businesses of agribusiness and
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wood-based sectors to reduce fluctuation risks of the domestic

automotive industry and balance with dollar-linked based income
business.
(3) Program to restructure debt based on providing benefits to creditors,
company and stakeholders (Astra Annual Report, 1998, pp. 21-8).

HRM long-term development and competitive advantage: impact of changes on

HRM policies and practices
The successful completion of debt negotiations is just one indication of the
quality of the Astra management. As discussed above, the company has
developed its human resource management to be a major asset. HRM is a
group-wide corporate function. Recently, in recognition of the importance of the
environment, the HRM function has been coupled with environment so that the
corporate function is entitled ``human resources and environmental affairs''.
The human resource division and the safety and environmental management
division comprise that corporate function. The Astra Management
Development Institute provides the management training support for the
group.
A uniform training system ensures a strong quality oriented culture. All
management staff go through the first ``awareness'' training level, the Astra
Basic Management Program, which covers the Astra total quality management
and forms the basis of the corporate culture which includes a team orientation.
Middle managers take the Astra Middle Management Program that focuses on
product quality and consumer satisfaction. The advanced stage is the Astra
Executive Program that is oriented toward business operation quality and
customer loyalty.
Business units have the flexibility to shape the organizational structure most
suited to their needs. For example, the safety and environmental management
Division has a team structure established by its present head. Teams headed
by team leaders support the environmental strategies of other divisions
(Sarwono and Prasetyo, Interviews, 2 and 27 July, 1999).
The Astra case shows the long development of a professional management
system that has become a core competence and a source of competitive
advantage. Unlike other business groups, it was able to break away from a
 International family business ethos through a judicious mixture of management philosophy,
Journal of foreign partner influence, and the development of an indigenous corporate
Manpower culture.
20,8 PT Rekayasa Industri
The last case to be discussed is different from the first two in that it is a state
556 enterprise. Indonesian state enterprises, in general, have a well-deserved
reputation for weak management, mismanagement and poor performance
(Habir 1990). Factors causing such performances range from government
interference and inflexible hierarchical structures to feudalistic management
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practices and outright corruption. There are, as always, exceptions to the rule.
And because these exceptions arise despite the pervading environmental
characteristics that encourage mismanagement and the like, they make good
cases to show how organizational innovations are possible under less than
optimal circumstances.

Background
PT Rekayasa Industri was established by the Government of the Republic of
Indonesia on 12 August 1981 to develop the national capabilities in engineering
and construction for large industrial plant into a world-class capability. Since
then Rekayasa has grown into the largest and most dependable engineering,
procurement and construction (EPC) company in Indonesia. The management
has a commitment to achieving excellence through detailed project
management services, engineering, stringent quality controls and the
application of state of the art engineering technologies. Despite the crisis,
Rekayasa in 1998 had annual sales of 608 billion rupiah with profits of 80
billion rupiah, and established itself as a leader in the industry. As in all state
enterprises, Rekayasa's manpower is mainly priumbi or indigenous Malay.
The company's scope of EPC business includes cement, mineral, power, oil
and gas, pulp and paper, and chemical and petrochemical plants, in addition to
feasibility studies and plant maintenance. Since the company's participation in
the construction of the Iskandar Muda Fertilizer Plant, East Kalimantan
Fertilizer III and the full EPC project, Pupuk Sriwidjaja-1B Plant in 1989/1990,
the growth and competence of Rekayasa in EPC has been stimulated through
cooperation with a number of leading international corporations. In the cement
industry, one of its initial core businesses, Rekayasa has completed Tuban I, II,
III and Tonasa IV plants that have total capacity of over 4 million tons of
cement per year.
Rekayasa has begun to penetrate the international market with two projects
in Malaysia, the Asean Bintulu fertilizer plant and a lube oil blending plant.
Other milestone achievements are winning the EPC services for the largest
geothermal project in the world and Indonesia's first granulated urea project. A
major priority of Rekayasa is an emphasis on quality management, as reflected
in efficiency, cost effectiveness and profitability. The objective is for Rekayasa
to become a competitive player in the international market. One milestone to
 reach this goal was the certification received from Lloyds Register Quality Human resource
Assurance for ISO 9001 Standard for Quality Management and Quality management
Assurance in 1996.
Over the years, the company has increased its knowledge as adjustments to
the scope of services and customer orientation take place continuously. Starting
out with Indonesian state-owned clients, Rekayasa now also has private
national and foreign clients. 557
Change management
Until 1994 Rekayasa had a captive market working solely on government
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projects acting as the government's arm in the execution of projects. However,

when more companies came into the market, Rekayasa began to feel
competitive pressure for projects. A need for a more professional approach to
project management became very apparent when, in 1994, the largest project in
Rekayasa's history up to that time was mismanaged, causing heavy losses and
creating debt larger than all its assets.
The financial position was so poor that the government considered closing
down Rekayasa. However, a government-owned engineering and construction
company for large industrial plants was considered strategically necessary.
Therefore, instead of closing down the business, the top management team was
replaced and the new CEO, Hari Suparto, was given a free hand to do whatever
was necessary to revitalize the company.
The new management team faced a daunting situation. The market was
shrinking as chemical and petrochemical companies were not increasing
production capacity nor constructing new plants. Rekayasa was not
competitive in other morkets such as oil and gas, and power plants. The
company's products and services were ill defined and its business processes
not standardized. For example, there was no human resource management
system or management information system in place. Finally, it had
accumulated losses of 24 billion rupiahs.
On the plus side, the company's highly educated corps of engineers was an
asset that worked to the advantage of the company in the changes that were to
come. Because Suparto was convinced that ``trust in your people's ability will
get you far'', the basic approach taken in the organizational change strategy
was 100 per cent empowerment (in his words, ``To me empowerment is a matter
of principle''), delegation, and participation, with minimal intervention from the
top management. This approach and the organization change itself were
readily accepted by the middle management and employees that had long
hoped for such changes. This attitude helped ensure that the change took place
promptly and relatively smoothly despite the radical changes made (Suparto,
Interview, 5 July, 1999).
The strategic steps taken began with a SWOT analysis and continued with
the execution of radical changes (relative to the previous regime) starting from
a zero-point base. These were:
(1) defining the company's mission, vision, objectives and goals;
 International (2) establishing an organization structure and human resource system;
Journal of (3) redefining the business processes;
Manpower (4) determining criteria and standards;
20,8
(5) measuring performance; and
558 (6) implementing a management information system.

An emphasis on human resource management: impact of changes on HRM

policies and practices
To accelerate the change process, several internal projects were implemented at
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the same time in 1995:

(1) Increase in the compensation system. Suparto believed that capable
employees in a high technology business were the primary and most
important assets of the company. Therefore, to increase productivity,
management had to show its confidence in its people by giving them
a competitive compensation, despite the company's unfavorable
financial position and despite government guidelines for state
enterprise salaries that compare unfavorably to private sector
salaries.
(2) Establishing a knowledge-based compensation system. Because of the
rapid development of high technology characteristic of Rekayasa's
business, heavy emphasis was placed on human resources in order to
keep apace. Criteria for levels of knowledge, problem solving ability, and
accountability became minimum requirements for personnel rankings.
To be promoted, a candidate would be examined by an examination
team. Salary levels would depend on the results of evaluations of work
done.
After implementation of company rankings based on minimum
requirements, knowledge gaps could be identified between ``what one
should know'' and ``what one actually knows''. To close the gaps, the
company developed a training program covering field of specialization,
project management, general management and personal development
(leadership, achievement motivation, teamwork, etc.).
(3) Internal development projects. Task forces were created to develop and
implement business infrastructure such as the human resource
management system, management information system, and accounting
system. With the exception of the accounting system that was developed
with the help of outside consultants, all other systems were developed
by using internal knowledge of organization members that later served
as the embryo of a learning organization. Financial pressures
encouraged such internal organizational learning as there were limited
funds available for outside consultants.
 The human resource management system took about six months to develop Human resource
and another six months to implement. Positive results were almost immediate management
as the ratio of operational to non-operational activities improved from 1:1 to 2:1.
The target for 1999 is to reach 4:1.
The development of the management information system created a faster
means of communication. It was also aimed at increasing efficiency by
becoming a ``paperless company'' through intranet communication. Rekayasa
559
has also committed itself to be an open organization by revealing all aspects of
the company through its intranet, from Suparto's daily vision of the company
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daily cash flow positions made accessible to all employees.

In essence, the company has redefined its business process by putting the
customer at the top of the service pyramid and top management at the bottom
and by disseminating this value throughout the organization.

Learning organization
Rekayasa is consciously striving to be an effective learning organization by:
. Learning from employees' experiences in their jobs, for example, by
organizing weekly lunch discussion where members of different projects
take turns sharing their experiences (both successes and failures) and
learn to justify their actions by answering inquiries from their peers.
Discussions also take place on the intranet (Rekayasa's internal
network).
. Organizing weekly Friday sessions where members who have attended
outside seminars/workshops disseminate results to others in the
organization.
. The monthly management meetings provide company updates to all key
members. They also provide an important forum where questions are
raised and action plans are reviewed.
Rekayasa believes that by being a learning organization, the company will
soon develop into ``fluid organization'', where members become very flexible in
their capabilities and are not locked into one position, making the company
itself more flexible in its efforts to obtain and manage projects. To Rekayasa,
strong and capable people are the ultimate competitive advantage, and all
efforts should be directed to its development.

Conclusion
Human resource management in Indonesia, as elsewhere in the world, is facing
numerous challenges arising out societal turbulence leading into the new
millenium. These challenges are placing heavy demands on owners of
businesses and their managers to build their organizations so that they may
compete effectively in the context of such turbulence.
 International The mini-cases presented above illustrate some of the organizational
Journal of strategies Indonesian companies are using to face an increasingly competitive
Manpower future brought about by globalization. They represent three different strategic
models that could provide guidelines to other organizations in Indonesia.
20,8 The first case of the Sinar Mas Group represents an international or global
strategic model in which there is a high degree of internationalization of
560 structure, systems and people. As a business group still dominated by the
founding family, the incentive-based corporate culture provides the
appropriate ``glue'' in such a diverse and differentiated corporate environment.
Internationalization can also provide important security for the continuation of
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family control, whether as a safeguard from the risks of an ambivalent national

perception of Chinese Indonesian businesses in Indonesia, the possibility of a
separation of ownership and management control (the assumption here being
that itinerant international managers would be less likely to wish for that
separation), or the fluctuations of the Indonesian economy. This international
model also allows for an accelerated rate of change as it is not dependent on the
development of national-based human resources and therefore could be seen to
be an attractive model for those organizations with the wherewithal to emulate
it.
The second case of the Astra Group represents a long-term national strategic
model. In Astra, despite the early influence of Japanese management practices,
the founding family deliberately developed an amalgam of management
practices that were fused, over the years, into a distinctive ``Astra'' corporate
culture. A hallmark characteristic was the effective blend of indigenous
pribumi and Chinese Indonesian managers that could continue managing the
group after ownership was separated from management. The management
structure and culture, in which there is a considerable degree of autonomy, has
withstood the worst shocks of the crisis, as evidenced by Astra being the first
business group to restructure its loans. While other organizations could
emulate the management development strategy of Astra, the long-term
perspective needed ensures that the competitive advantage Astra enjoys in this
area could be sustained for some time to come.
The third case, the state enterprise Rekayasa Industri, illustrates a
participative or empowerment model. In the developing context of Indonesia, it
is also the most encouraging model for other Indonesian organizations. First,
despite being in a governmental institutional environment which is not
conducive to participative approaches, the company has been able to show high
corporate performance using just such an approach. Second, there is a common
assumption that a knowledge-based economy requires a highly skilled and
educated population. The usual corollary to this is that countries such as
Indonesia have a dearth of such manpower, implying the need to invest in
education. We agree with this argument. However, it could also be argued that
it may be just as important, if not more so, to be able to utilize fully the
manpower available. Competitive advantage comes from the realization of
potential. The Rekayasa case, notwithstanding the company having a highly
 trained management force, together with the illustration of Indonesian farmers Human resource
and their mastery of integrative pest management, provides an argument that a management
participative/empowerment model could be better suited to effect full utility of
manpower.
The cases presented by no means represent a general trend, much less a
paradigm shift, in the Indonesian business environment. However, they offer
intriguing management possibilities in a developing country business context 561
where cultural and political assumptions could discourage ideas such as
empowerment, participation and transparency.
The developments illustrated in the cases began during the Soeharto era.
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One could argue that the development of the private sector during that era
arose in part through providing a setting where employees could experience
more of a ``civil society'' compared to such organizations as the civil service or
the state enterprise sector. If the country moves towards a civil society after the
recent political turmoil and change, it would be interesting to see whether more
companies would view empowerment based organizational innovations as a
competitive advantage.

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Appendix
562 Name Sinar Mas Astra Rekayasa

Dominant ownership Family Chinese Publicly owned State enterprise

Indonesian conglomerate
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conglomerate
Core businesses Pulp and paper, Automotive, heavy Engineering and
agribusiness, food, industry, agribusiness, construction services
finance and property wood-based industries
Leadership Family Collegial management Transformative
Past corporate Family commodity Industrial import Protected government
orientation based substitution market
Corporate strategic Global export Mixed national and Competitive mixed
response Y2000 commodity base international domestic/international
industrial commodity market
base
Political environment Defensive Integrative Competitive
risk response
Dominant management Chinese Indonesian Blend of Pribumi and Pribumi
human resource and international Chinese Indonesian
composition
Human resource Incentive based Corporate culture Participation based
response Y2000 based
Rate of change Late evolution Early evolution Late revolution
Summary lessons A Chinese Indonesian Management Transformative
learned conglomerate can philosophy and leadership and a
survive a sometimes business strategy can participative HR
hostile domestic encourage a strategy strategy can create
business environment of integration. A competitiveness. A
by going international. Chinese Indonesian useful model for pribumi
An incentive-based family business can firms. A homogenous
system provides the develop a national and educated workforce
glue for a disparate based corporate is a factor, though not a
HR population. The culture with an necessary condition as
system can be effective blend of other examples of
implemented in a pribumi and Chinese Indonesian farmers
relatively short time. Indonesian attest.The use and
The stability of the management understanding of
strategy has yet to be personnel to create the communication
tested depth and stability technology (intranet)
necessary to face also helps. The stability
Y2000. This strategy of this strategy is also
requires time and yet to be tested. But
commitment to communication systems
Table AI. succeed in place could ensure
Three Indonesian cases continuity
± human resource
responses to the Note: The rate of change refers to the type and stage of development in which the response
millennium to the Y2000 was made
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