1. What are the differences in national culture impacting the expectation of headquarters, behavior of Anurag Bhatt, as an expatriate, and the response of Indonesian managers, as locals in the context of their own societal contact?

2. What is inhibiting the Indonesian mangers from enthusiastically making a strong case for their own candidacy for the position of Head of Procurement and encouraging them to suggest the suitability of the other candidates?

3. What should Anurag Bhatt do to get out of this impasse?

Anurag Bhatt (AB), Managing Director {MD} of Coats Indonesia, was on a flight li'om Bangalore to Singapore on his way to Jakarta after a vacation. As he settled into the ight. his thoughts migrated to work-related issues in Indonesia. He recalled the various initiatives that he had undertaken to transform Coats Indonesia into one of the best performing subsidiaries of Coats Group PLC. This also triggered reections on some of the leadership mis-steps he had taken in the early part ofhis tenure in Indonesia, driven by the desire to achieve results for the company and himself. but without necessarily being sensitive to the cultural context ofthe managers and employees that he was leading. He wondered ifhe could distil, from his experiences. a set ofguidelines for expatriate managers on how to lead in Indonesia. It would be a further contribution to both Coats Group PLC, as an employer, and Indonesia as a country and economy, that had provided the opportunity for him to evolve as a leader. His reections were interrupted when he was reminded ofan issue that he had encountered just before the vacation but not yet addressed. It would denitely be one ofthe first issues he would have to handle on his return. An effort to fill a senior position, Head of Procurement, currently occupied by an expau'iate. had not been received with enthusiasm by those who seemed to have the potential to take on the role. Dne-onone conversations with the potential candidates had not helped as each one suggested the name of another person as more suitable for the role. He had faced similar difculties in recruiting local candidates to occupy other senior roles. Nothing in his experience from the past helped him Lmderstand how the interviewed candidates were unwilling to accept an opportunity for career growth. One ofthe goals that had been assigned to him as he accepted his current role was to reduce the number ofexpatriates in senior ranks in Coats lndonesia. This was not feasible unless local managers were willing to rise to the occasion. He needed a way to address the lacl: of enthusiasm among managers in Coats lndonesia to take on positions with greater responsibility. He had some ideas, based on the short experience in the country, but was willing to get inputs liom anyone who might have a better understanding ofthe drivers ofbehavior oflndonesiarts. in general, and managers, in particular. COATS GROUP PLC Coats Group PLC is a multinational company headquartered in the United Kingdom. and a world leader in the manufacture and distribution ofsewing threads and other supplies, and also a leader in the zips and fasteners market. It traces its origins to two businesses founded in Paisley, Scotland: the loom equipment and silk thread business founded by James and Patrick Clark in \"55. and the weaving business founded by James Coats in \"202. Both businesses ourished independently until their merger in "396 to create J 3:, P Coats Ltd. In l9l2, it was ranked the third largest company in the world in terms of market capitalization. It gradually expanded its footprint with manufacturing and disu'ibution facilities across the world In 2003, Guinness Peat acquired the ownership of the company, and delisted it from the London Stock Exchange to further reorganize the manufacturing and distribution bases from the traditional locations in the West. mostly Britain and the United States. to the East, mainly Asia. The reorganization was driven by the need to reduce costs and become more competitive relative to new entrants from Asia in a globalized world. However, the transformation did require efforts to build operational and human capacities in different subsidiaries, including that in Indonesia. In 2010, the newly appointed CEO, expanded the business into new products and services that went beyond the traditional businesses. After the reorganization and the new direction, the company was again listed in the London Stock Exchange in 2015 as Coats Group PLC. In 2019, Coats was a world leader in industrial threads and zips and fasteners. In 2016, it reported global revenues of US$ 1510.3 million and net income of US$ 95.1 million. It employed about 19,000 employees in over 50 countries around the world. Since the manufacturing base shifted from the United States, Europe, and Japan to low cost producers in Asia, the company's sales in Asia accounted for over 70% of global sales, with India, China, Indonesia, Vietnam, Pakistan, and Bangladesh being the main countries. COATS INDIA (MADURA COATS PRIVATE LTD.) The Indian arm of Coats Group PLC has its origins in the establishment of A & F Harvey Spinning Mills in Ambasamudram in Tamil Nadu in 1880. Separately, Madura Mills Co. Lid. was established in Madurai in 1889. In 1942, J & P Coats (India) Pvt. Lid., a 100% UK owned company, was established under the name Jamuna Thread Mills Lid. to manufacture sewing threads in Koratti in Kerala. On July 31, 1974, Madura Coats Lid. was formed with the amalgamation of these companies. Madura Coats Ltd. had three operating divisions, namely (i) Coats India Thread, (ii) Madura Apparel Fabrics, and (iii) Madura Industrial Textiles. A fourth division called Madura Garments was also added. However, this was later sold off to the K. M. Birla Group in 2000, followed by exits from apparel fabric and industrial textile businesses in 2001 and 2002, respectively. In 2019, it was a 100% owned subsidiary of Coats Group PLC with a focus on threads. COATS INDONESIA The company had two plants in Indonesia, located in the western and eastern parts of Java Island, near the main cities of Jakarta and Surabaya, respectively. As most of the company's domestic customers were located in West Java, the Jakarta plant catered to the customers located there, who either exported their products to the developed countries or produced them for local consumption in the upscale market in Indonesia. The unit near Surabaya produced products that were mainly for export to group units in Europe, the United States, and even other Asian countries. After the financial crash of 1997 and replacement of dictatorship with democracy, Indonesia was by far the lowest cost country in the world, as the currency had crashed to one-fourth its earlier value versus the dollar. Many global consumer companies shifted their sourcing to Indonesia, and Coats customers were in the forefront of this move. As a result, the Coats Group had also relocated plants from Europe to Indonesia to manufacture products which would be exported to its European subsidiaries for sale to customers in Europe. The importance of Indonesia within the Coats Groups was therefore expected to increase. The number of employees in Indonesia was increased from 1000 in 2000, to 1750 in 2001, with most of the increase coming in the export oriented East Java unit.It was in this context of gro'w1h that Anurag Bhatt was appointed MD of Coats Indonesia in 2000. He was offered the position during a visit ofthe global CEO to India. His immediate boss. the Managing Director of Madura Coats P\". Ltd. and Regional ChiefofSouth Asia Region, encouraged him to accept the offer, as it gave him better long-term career prospects. AB had never been in the same position for more than 3 years, and was beginning to get bored with his current one. Coats India Thread was a very large division, but a stable one. After some thought, he decided to accept the move to Indonesia Anurag had worked at Madura ICoats for over 20 years in India, starting as a Management Trainee after completing an MBA from a leading institute; and during \"QT-2000, he had been head of Coats India Thread which was the largest division of the company in India. Earlier, he had been head of Madura Apparel Fabrics business t IQ'JSQ'J'}, aer several area sales assignments in various pans of India in the threads division, culminating in head ofsales and marketing ofapparel fabrics. AB was largely a risk averse, conservative individual, and not personally very ambitious, which matched his temperament with the requirement of Coats. Promotions in Coats India were largely based on seniority. However, he had risen rather quickly in the company due to a combination of common sense. an open and trusting, modest manner. which made him very popular with his colleagues and subordinates. and some good luck. AB was quite excited by the challenge, and based on his past experience in India. was quite condent of success. He had dealt with Europeans, either as bosses, or colleagues, or customers, and got along ne with them. so did not expect too many problems in handling the multinational management team in Indonesia. Leadership challenges during the transformation at Coats Indonesia. As preparation for taking on the newassignment, he went to the UK headquarters in early 2001, where he was Further briefed on the nature ofthe assignment. He became aware ofthe institutionalized corruption during the dictatorship in the country. which had ended in \"3'03, and recent attempts to eliminate corruption with several high prole people being sent to jails after accepting their crime. He had been able to avoid corruption in the Indian operations, and hoped he could avoid it in Indonesia too. He was also told that the dominant religion was Islam, and religion played a very central role in the life of an Indonesian employee even in the workplace. Without having visited lndonesia, he imagined a male dominated and aggressive society with restrictions on interactions between men and women, and a male dominated workforce with gendered roles women occupying a narrow range ofroles. He wondered how he would have to adapt his approach to management in such a context. The biggest challenge identied by the company in Indonesia was the quality of manpower, particularly supervisory and managerial, and one key goal given to AB was to develop a strategy to develop local managerial talent. In the long term, the company wanted to replace the large number of expatriates in Indonesia with locals. as had been done in India successfully in the l0?0s and 1030s. AB was under the impression that his experience in India with some ofthe practices used to develop and nurture local talent may be applicable in Indonesia too. After arriving in Jakarta, AB had a series ofmeetings with the outgoing MD [who was moving as MD of ICoats China), and the senior management team Apart from AB, the management committee had six members who were the functional heads of Finance, Sales, Logistics En Information Technology {IT}, Human Resources til-IR}, and Manufacturing, all based in Jakarta, and the general manager of the East Java plant based in Surabaya. Except the HR Head who was Indonesian. as required by Indonesian law, the. remaining members of the committee were expatriates All the expatriates were fairly new tn Indonesia having been posted there in 2000 or later, except the West Java manufacturing chief, who had been there for 3 years For many ofthe expatriates, this was their rst managerial role outside of Europe, and some of them were still recovering from the shock that Asia gives at rst sight An Irish expatriate remarked that he saw 'more people daily on the road to the factory than the total population ofhis native country!' AB chaired his rst management committee meeting in May 2001. Alter the nancial crisis in SE Asia in l997, and the collapse of the local currency, the company had started pricing its products in US dollars. This led to windfall gains as local inputs like power and labor had become very cheap, :5 they were priced in Indonesian Rupiah, and since most of the customers were exporting their production and getting their revenue in dollars, they were agreeable to pay Coats in dollars At the meeting, all members of the management committee were convinced that Coats Indonesia was on a path ofhealthy growth. After assuring himself that the Coats Indonesia operations were on a rm footing, AB gradually steered his attention towards the top priority goal assigned to him by the Coats Global leadership building up local human capability at all levels of the Indortesian subsidiary. Apart from ve on the management committee, there were ten more expatriate managers in Indonesia, reporting to one or the other committee member. AB wanted to formulate a plan to replace the II) lower level managers with locals in the first stage, and then replace expatriates with locals at the management committee level in the second stage. All expatriates agreed that this goal was worth achieving soon. as many wanted to go back to their home country as soon as possible. Based on the discussions, an analysis ofthe strengths and weaknesses of the local workforce was made. Some ofthe strengths and weaknesses identied were as below: Strengths i} Workers were very disciplined and hardworking, and the labor unions were cooperative. ii} Workers were mostly high school graduates. due to the compulsory school education policy, which made them capable ofunderstanding and following instntctions diligently. iii} Average age of the workforce was just 33 years and average length of service was It] years. Workforce turnover was very low. iv) There was a 50% female representation in the workforce, and among new recntits, the percentage was even higher. They were considered better than their male counterparts for most of the manufacturing processes in the company. However, at supervisory level, the percentage dropped to about 30%. at management level to 20%, and at the management committee level it was zero. Weaknesses i} Workforce at all levels lacked analytical skills Compulsory education had made them literate. but had not encouraged independent thinking, or creativity. ii) Since college education was expensive and rarely available, most Indonesians started blue collarjobs aer completing school. It was difcult to recruit managers or even supervisors directly from college as done in other countries. Organizations resorted to internal promotions resulting in many under qualifred managers. iii} English language was not spoken by most locals even at manager level. which made upward communication with expatriates difficult. While the expatriates did try to learn the Bahasa language to improve their communication with locals, they complained that at most meetings, the locals kept silent, not offering any comments or suggestions. iv} The workforce lacked initiative. Local managers felt that it was the job of expatriates to think and decide, while their job was to keep the expatriates happy. Over the next few weeks, the committee formulated a series of steps to address the problems identied. All committee members made it a point to ask their local managers for their inputs in all discussions. It took a lot ofcoaxing to get them to think, formulate an opinion. and then express it. The key issue was to transfon'n the culture of the organization into a performance oriented culture with individuals being rewarded for their performance. in order to help them perform better and also aspire to take on roles of higher responsibility. As a rst step. AB addressed the managers and supervisors (through a translator} at several town hall style meetings, at both sites, and clearly explained the objective ofthe committee. His message was i} Coats Indonesia operations had been achieving high growth in sales and prots in the last few years, and now the expectations were even higher. and more machinery was being relocated from Europe to Indonesia to expand capacity here. ii) This gave the Indonesian employees a great opportunity to show their capability and talent, and to rise higher in the organization. iii} Coats Indonesia should ideally be run by Indonesians, and they should be making all the operational decisions. India too was largely run by expatriates until the IElTI'Ds, but by I'J'Els was exporting MD level people to other countries, and there was no reason Indonesia could not do the same. iv} Lack of English language knowledge had been identified by the committee as a big barrier in the way of talented Indonesian employees, and accordingly the company would arrange free English language classes during working hours for any employee who wanted to attend them. v} Employees at all levels were encouraged to express their opinions, and take decisions which were within their sphere. Employees would get full credit for any successful ideas or decisions contributed by them, while the responsibility of any unsuccessful decisions would rest with top management, so there was no risk for them. vi} As patriotic Indonesians, it was incumbent on them to raise the prole of Indonesians in the global community. and Coats wanted to be a leader in this respect. At one of the meetings, the slogan \"Aye kite bird", meaning "yes, we can do it\He recalled how some of his understanding of Indonesia had to be revised. On some dimensions, Indonesian society was worse than he had thought; and on many more, he realized that he had been hasty in coming to negative assessments. For example, when he had learnt about the efforts to eliminate corruption with several important people going to jail, he developed a positive feeling. However, alter arriving in Indonesia, he learnt that respect for people in high office was so high, that they would continue to be treated very well even alter conviction. Many of the people who voluntarily accepted guilt and willingly went to prison did so with the understanding that they would have a 'good' life even in prison. This realization did sadden him. On the other hand, he realized that many of his apprehensions were misplaced. Given his experience in India in the I'J'S'IJs, he was prepared to face a non-cooperative government bureaucracy. However, he found that the attitude of government officials towards those running businesses was in stark contrast to what he had experienced in India. Getting appointment was easy, which could be done over phone. The meeting would start on time or before, but never late. 11-1e official would suggest many ways to solve the problem instead of nding objections to all the proposals to address the issues. Followup action was prompt and did not require multiple liirther visits to the official. Hence, dealing with the government ofcials was far more pleasant than he had imagined. Similarly, his concern about the possible impact of Islam on social and work life in Indonesia was proved to be ill-placed. Praying ve times a day and observing fast during Ramzan was common. but the approach to others was ofunfailing courtesy and respect. Ali's nationality or religion was a non-issue in interactions. He also noticed that Indonesians may be shy to talk in meetings, but otherwise were very social people who enjoyed life. AB remembered some ofthe shiest employees transformed into condent 'tigers' once they had a mike at a social event. They would sing [including Hindi and English songs}, dance, and enjoy themselves, and all without any alcohol! Also. a welcome surprise, was the gender equality and the level of female participation in work force. The female workforce may wear the headdress reflecting religious conformance. but then wear jeans and t- shirts, and ride their own motorcycles to work without any restrictions. Government schools were co- educational and interaction between the males and females in schools, colleges and workplaces was normal and devoid of controversy. Ironically, when Coats introduced a global policy on sexual harassment in the workplace and started a whistleblower mailbox where people could send their complaint to the global CEO, [he only complaint he received from Indonesia was from a male supervisor alleging harassment by some female workers. He said they kept calling him to their work station on some pretext and touching him inappropriately. 0n checking with his boss, AB was told that this supervisor was good looking and pleasant and consequently attractive to the women workers! Also. the role of Islam in removing rank distinctions was noticeable. AB recalled he once spotted an ofce boy sharing his lunch will-1 a female manager from the organization and they were chatting and laughing like friends over lunch. It was a little in contrast to his experience in India where it would difcult to nd situations in which rank or gender did not impact free interactions between employees. Further, he could recall some incidents in which he had misread the local culture because he was steeped in the corporate culture of Coats India. which in turn was a blend of Indian inuences and an Anglo- Saxon culture due to colonial inuences and the Coats corporate culture. One incident that came to mind was the role ofa religious leader in labor management agreements. In the early part of his stay, when an agreement with the labor union was reached, the union requested that the imam {priest} of the nearby mosque be invited to the ceremony. Somewhat reluctantly. AB agreed to the request. He was delighted when alter the signing. the priest invited all present to recite a short prayer for the success of the agreement being signed, and then gave a briefsermon exhorting the employees to do their utmost for the welfare and success ofthe company, which provided them and their families a livelihood. In the second incident. AB himself was a key actor. Very early in his stint in Indanesia, he one day got quite upset at someone who had made an elementary mistake, and he quite loudly explained to the individual concerned how to avoid the mistake in future. It was quite a detailed explanation. and at the end of the 'lccture'. AB felt good that he had taught someone something. He noticed that the employee after leaving his cabin was being questioned by his colleagues about what had transpired in the cabin. and he was saying something to them. He asked his secretary to find out discreetly what exactly he said. She told him that he simply said "the boss is angry today". That was all he seemed to have not paid attention to what was said. 11-1e head of HR later explained to AB that in Indonesia raising voice and getting angry is considered a loss of sanity and rationality, so the person at the receiving end simply switches off and stops listening, because there is no point listening to a 'mad' person. So, AB's long lecture was a waste of time and energy. He kept this input in mind for the future as it was in contrast to his experience in India. He recalled that in India. a subordinate was likely to interpret anger by the boss as an expression of criticality ofthe issue, and it ensured that the subordinate addressed the problem. As he had become familiar with the country. he had also realized that Indonesia was a very diverse country, with thousands of inhabited islands, and a large number of ethnicities, religions. and languages. One of the large minority groups is the ethnic Chinese community, which has a disproportionate high share in industry and trade. and therefore in the wealth ofthe country. Much ofwhat was being said about "Indonesian" culture was not found to be applicable to them. They were more ambitious than local lndonesians, and motivated by money and power. Often, for commercial functions like sales and procurement, it was better to employ them as their motivations were compatible with the practices at Coats. Since many of the customers and suppliers that Coats Indonesia engaged with were to a large extent of the same ethnicity, the presence of persons ofChinese ethnicity in senior management positions also helped bridge cultural gaps will-1 them. AB wanted to fill the position of Head of Procurement with a local manager, who would be effective in the role as seen by the global norms of Coats, but with full sensitivity to the local culture and context. He was open to accepting advice from someone who understood the subtilities of Indonesian society and cultLtre to select a local who would be motivated to take on greater responsibility in a role currently occupied by an expatriate with more enthusiasm than he had observed in his recent attempts to identify the right candidate