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Doing business in Indonesia (part 4)

Corporate Structure
In line with the culture, Indonesian businesses have a hierarchical nature, are centrally organized, with decision making controlled by top management, usually the firm's founder or key family member. Given this authoritarian structure and sense of obligation to the patriarch, there is very little accountability or delegation of work. The concept of professional management was introduced by multinational corporations and is only slowly extending to local organizations. The training of Indonesian managers continue to be an important objective for most foreign companies. Traditionally, because there is a higher regard for a person's social background and ethnic group than their ability, selection of staff is often based on irrelevant criteria by Western standards. Social harmony is also valued more than work efficiency. Thus the introduction of managers qualified by ability and training is still a difficult task. Of course the criteria used by Indonesians are not totally irrelevant since background and connections are just as important in advancing the company's line as quality or service or product.

Take care in interpreting the financial viability of an Indonesian company with whom you may wish to link up or do business in some form. They often maintain two sets of books, one to present to the tax authorities.

There is a vast bureaucracy which is under trained, underpaid and ineffective. Many are part time in their attendance at work, going to another job in the afternoon to earn enough for basic living. Low salaries have also been an inducement to petty corruption.

Much Malay Indonesian business is conducted informally on the golf course and over lunches and dinners. This is due to the importance of family and in group within the culture. Business is done between friends and does not require a formal setting. However, a more formal approach is taken by Chinese business persons, who believe that meeting and business meals must focus around a specific business purpose, and not be limited to or wasted on general relationship building. In Malay Indonesian culture time is regarded as limitless and to be savored; to be spent with others and enjoyed. This leads to business, like other activities, being conducted in a rather leisurely manner.

This means that negotiations are slow and frustrating for the busy Westerner who wants to close this deal and move on, fearing on missing out on other opportunities. Too much time seems to be spent in listening and enjoying eating together and not moving towards any decisions. Patience is virtue when dealing with Indonesians. Bargaining is also a way of life to them. For instance, they have bargained daily at the street markets and it becomes an automatic response to bargain and negotiate for more favorable terms. Your best role is to join in the bargaining. Don't make concessions quickly, but be ready to use a concession to extract a better bargain for yourself. The Indonesians will not rush into any decision simply because you show impatience. Plan to stay a while or arrange several tips to negotiate a sizeable deal.

Decision making is done by informal consensus, prompted by the senior decision maker who has the ability to over ride the group. Most Malay and Chinese Indonesians will not question the authority of that senior decision maker. To preserve group harmony and consensus Indonesians will strive to gain complete agreement without hurting anyone's feeling through bargaining, compromise and consensus. Indonesians with less experience of the international business world tend not always to be practical and realistic, but allow emotions and intuition to sway their judgment. They also need o believe that a business interaction feels right and is for the greater good and a traditional belief in fate will slow through in that "if a deal is meant to be, then it will be."

The important considerations in gaining a business contract appear to be a combination of product or service quality and personal relationship. Price is often less important than the financing terms. If the appropriate personal connections are involved the government will negotiate more on price than on quality. Other important criteria, particularly when doing business with the government, are follow up service and specialized training for employees.

Indonesians rarely say "no". They will employ the word belum (pronounced 'b'loom') which means "not yet". It has less of a blunt finality about it. The keys to gaining business in Indonesia are patience and persistence. Even if you receive initial rejections, you and your organization should continue to foster relationship and maintain a presence in Indonesia, either through a dedicated company representative or a consultant or adviser if you are really intent on doing business in Indonesia. It is likely that you will eventually be awarded a government contract. There are two reasons why it pays to soldier on. Firstly, Indonesians have an inability to say "no" to a "good" credible party who show interest in their country and appear interested in a long term commitment. Secondly, in large contracts or projects the government attempts to maintain a balance by splitting the contract between companies from different countries. The private sector tends not to give in like the government. So while polite persistence is viewed as a positive sign of commitment, the probability is much less that the private sector will change its decision.

An acceptable personal demeanor is a necessary factor (although insufficient by itself) to assist, but not guarantee, gaining a contract. But if your personal demeanor is upsetting and discomforting to the Indonesians, it will certainly lose you a contract. Indonesians appreciate tact, no shows of temper or frustration, a quiet voice, demonstrated respect and humility. Shouting, arguing, emphasizing your status or skills, pointing out mistakes or lack of knowledge are frowned upon. If you believe that they have picked up the wrong message , have failed to answer a question or made an error, you should ask further questions or make suggestions in an indirect and unassuming manner. Many Indonesians will be hesitant to ask you questions out of fear of being wrong. Because Indonesians rarely attempt to assign tasks or assume responsibilities, you should suggests that both parties identify responsibilities and outline the steps or actions to be taken and the corresponding time frames. Be careful not to appear commanding or patronizing. Never say anything negative in public. Indonesians tend to understate issues especially negative ones, and may not inform you of problems. The use of  a go between acceptable to both sides can help sort out major misunderstandings.

If you have local partners it is better to let them run the negotiation as they know the rules and will probably win  you a better deal than if you did the negotiating by yourself. Local partners will also negotiate the appropriate "commission". This "commission" is a common aspect of doing business in Indonesia. The spend of completion of a transaction and whether it is ever transacted at all, may depend on how "financially satisfied" the relevant government officers are. Indonesians perceive the government not as a "servant", as is typical in many Western countries, but as a "partner" in facilitating joint activities for the good of the country. Therefore they argue that a "commission" is appropriate for those who are doing you a favor by providing their support and official imprimatur, It is all part of a culture pattern in which who you know and whose support you have is the crucial factor.

You also need a local partner or representative or agent to ensure your transaction and company remains high up on the Indonesians counterpart's agenda. If there is no one there to keep contact and keep things moving , your project will lie dormant. Reference has been made above the lack of concern for the passage of time. "Out of sight, out of mind", is very applicable if your presence is not there in some form to jog the events along . E-mail, faxes or other long distance communication effort will tend to be ignored as Indonesians appreciate personal contact.

The legal contract is only a starting point for a business link an is most likely to be modified later as both parties recognized what is in their best mutual interests. Because Indonesians believe that fate or bad luck make certain things happen or not happen, there has to be this willingness to massage the original agreement into something that is more realistic, given whatever new circumstances and constraints are arising. The cultural preference for consensus also means that litigation is rare and not the preferred action of choice. Thus the initial contract or agreement is simply a reference point for the current situation and does not always provide an accurate breakdown of responsibilities. This is why a continuing presence and close relationships are needed so that the progress of an agreement can be monitored, potential problem areas identified quickly as they arise, and early informal resolution achieved. Indonesians tend to take any major event associated with a contract, such as its signing, or the completion of a project, very seriously and turn them into a celebration. They will invite eminent persons and senior officials to attend the celebratory feast. The Indonesians love to have an excuse to eat with their friends.

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