Leadership Hurdles in an Unfamiliar Culture

Amitabh Bachan (AB), the Managing Director (MD) of Clothes Indonesia, was on a flight from Bangalore to Singapore on his way to Jakarta after a vacation. As he settled into the flight, his thoughts migrated to work-related issues in Indonesia. He recalled the various initiatives that he had undertaken to transform Clothes Indonesia into one of the best performing subsidiaries of Clothes Group PLC. This also triggered reflections on some of the leadership mis-steps he had taken in the early part of his tenure in Indonesia, driven by the desire to achieve results for the company and himself, but without necessarily being sensitive to the cultural context of the managers and employees that he was leading. He wondered if he could distil, from his experiences, a set of guidelines for expatriate managers on how to lead in Indonesia. It would be a further contribution to both Clothes 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 reflections were interrupted when he was reminded of an issue that he had encountered just before the vacation but not yet addressed. An effort to fill a senior position, Head of Procurement, currently occupied by an expatriate, had not been received with enthusiasm by those who seemed to have the potential to take on the role. One-on-one 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 difficulties in recruiting local candidates to occupy other senior roles. Nothing in his experience from the past helped him understand how the interviewed candidates were unwilling to accept an opportunity for career growth.

One of the goals that had been assigned to him as he accepted his current role was to reduce the number of expatriates in senior ranks in Clothes Indonesia. This was not feasible unless local managers were willing to rise to the occasion. He needed a way to address the lack of enthusiasm among managers in Clothes Indonesia 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 from anyone who might have a better understanding of the drivers of behavior of Indonesians, in general, and managers, in particular.

Leadership challenges during the transformation at Clothes Indonesia

As preparation for taking on the new assignment, he went to the UK headquarters in early 2001, where he was further briefed on the nature of the assignment. He became aware of the institutionalized corruption during the dictatorship in the country, which had ended in 1998, and recent attempts to eliminate corruption with several high profile 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 Indonesia, 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 of roles. He wondered how he would have to adapt his approach to management in such a context.

The biggest challenge identified 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 1970s and 1980s. AB was under the impression that his experience in India with some of the practices used to develop and nurture local talent may be applicable in Indonesia too.

After arriving in Jakarta, AB had a series of meetings with the senior management team including the functional heads of Finance, Sales, Logistics & Information Technology (IT), Human Resources (HR), 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 to Indonesia having been posted there in 2000 or later, except the West Java manufacturing chief, who had been there for 3 years. For many of the expatriates, this was their first managerial role outside of Europe, and some of them were still recovering from the shock that Asia gives at first sight. An Irish expatriate remarked that he saw 'more people daily on the road to the factory than the total population of his native country!'

AB chaired his first management committee meeting in May 2001. After the financial crisis in SE Asia in 1997, 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, as 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 Clothes in dollars. At the meeting, all members of the management committee were convinced that Clothes Indonesia was on a path of healthy growth.

After assuring himself that the Clothes Indonesia operations were on a firm footing, AB gradually steered his attention towards the top priority goal assigned to him by the Clothes Global leadership - building up local human capability at all levels of the Indonesian subsidiary. Apart from five 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 10 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 of the strengths and weaknesses of the local workforce was made. Some of the strengths and weaknesses identified were as below:

Strengths a) Workers were very disciplined and hardworking, and the labor unions were cooperative. b) Workers were mostly high school graduates, due to the compulsory school education policy, they are capable of understanding and following instructions diligently. c) Average age of the workforce was just 33 years, and average length of service was 10 years. Workforce turnover was very low. d) There was a 50% female representation in the workforce, and among new recruits, 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 a) Workforce at all levels lacked analytical skills. Compulsory education had made them literate, but had not encouraged independent thinking, or creativity. b) Since college education was expensive and rarely available, most Indonesians started blue collar jobs after completing school. It was difficult to recruit managers or even supervisors directly from college as done in other countries. Organizations resorted to internal promotions resulting in many under- qualified managers.

c) 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. d) 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 identified. All committee members made it a point to ask their local managers for their inputs in all discussions. It took a lot of coaxing to get them to think, formulate an opinion, and then express it. The key issue was to transform 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. AB addressed the managers and supervisors (through a translator) at several town hall style meetings, at both sites, and clearly explained the objective of the committee.

His message was; a) Clothes Indonesia operations had been achieving high growth in sales and profits 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. b) This gave the Indonesian employees a great opportunity to show their capability and talent, and to rise higher in the organization. c) Clothes 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 1970s, but by 1990s was exporting MD level people to other countries, and there was no reason Indonesia could not do the same. d) 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. e) 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. f) As patriotic Indonesians, it was incumbent on them to raise the profile of Indonesians in the global community, and Clothes wanted to be a leader in this respect. At one of the meetings, the slogan "Ayo kita bisa", meaning "yes, we can do it", was suggested by one of the employees, and this was immediately adopted as the tagline of the organization.

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 Clothes, 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 culture to select a local who would be motivated to take on greater responsibility in a role currently occupied by an expatriate.

Source: Adapted from Ojha, A. and Bansal A. (2020). Harvard Business Review.

Question 2: AB wanted to fill the position of Head of Procurement with a local manager who would be motivated to take on greater responsibility in a role currently occupied by an expatriate. Address the following questions. a) Explain the staffing approach that Clothes Indonesia intends to practise. Write the answer in essay format and include in-text citation & reference. (The word count should be between two hundred to three hundred words) b) Critically discuss the reasons behind this strategy. Students may include discussions on expatriate failure and/or other relevant points. Write the answer in essay format and include in-text citation & reference. (The word count should be between four hundred to five hundred words) c) There are poor take-ups from local staff. Relate this scenario to a relevant cross-cultural concept on motivation. Suggest the efforts that AB can do to motivate Indonesian managers to take on more responsibilities. Write the answer in essay format and include in-text citation & reference. (The word count should be between four hundred to five hundred words)