Indonesia, Asia’s less talked-about jewel, is nonetheless a significant market for any organization with global aspirations. A robust domestic market fueled by a growing middle-class poses challenges for both local and multi-national companies alike. In 2012, Hay Group and Fortune magazine in Indonesia launched our country’s first Most Admired Companies with the aim of understanding what sets successful companies apart from their peers in our market. Published in January 2012, the rankings include local luminaries like PT Astra International, PT Unilever Indonesia, PT Bank Central Asia, PT Bank Mandiri and PT Garuda Indonesia in the top five. In this Viewpoint, we will summarize what makes them admired by their peers and incorporate some observations from Hay Group’s Leadership forum, held in Jakarta on 25th January 2012, in tandem with the launch.

1. 1
East meets
West:
An executive leadership challenge
Feb 2012 What does it take to lead Indonesia’s Fortune’s Most Admired
companies?
Indonesia, Asia’s less talked-about jewel, is nonetheless a sig- In 2012, Hay Group and Fortune magazine in Indonesia
nificant market for any organization with global aspirations. launched our country’s first Most Admired Companies with
A robust domestic market fueled by a growing middle-class the aim of understanding what sets successful companies
poses challenges for both local and multi-national companies apart from their peers in our market. Published in January
alike. 2012, the rankings include local luminaries like PT Astra
International, PT Unilever Indonesia, PT Bank Central Asia,
Furthermore, the government’s economic master-plan, PT Bank Mandiri and PT Garuda Indonesia in the top five.
“MP3EI”, aims to move Indonesia from an efficiency-driven
economy to an innovation-driven economy by 2025. Key In this Viewpoint, we will summarize what makes them
success factors include development of knowledge workers, admired by their peers and incorporate some observations
the management of knowledge and enabling technology, from Hay Group’s Leadership forum, held in Jakarta on 25th
the fostering of entrepreneurship that fuels innovation, and January 2012, in tandem with the launch.
research & development (R&D). In addition to the infra-
structural changes needed to support this breakthrough, the
mindset and skills of Indonesian workforce and management
also needs to shift. How can this be achieved?
©2012 Hay Group. All rights reserved www.haygroup.com/id

2. 2
Leading Indonesian companies
The frustration factor
The economic indicators are optimistic: FDIs into Indonesia is rising.
Middle class disposable income is also rising. Consumer spending
is also rising. And yet CEOs are finding it harder to translate this
optimism into their own business. It seems that an extraordinary
amount of effort needs to be put in just to increase output, revenues
or even to decrease cost of sales. And worse, in some cases, the effort
seems to be inversely proportional to the results.
Hay Group believes that the secret lies in Sadly, only one in six employees here
tapping into the discretionary effort of believe themselves to be effective in their
employees. According to an extensive study jobs. This is an astonishing figure. If you
on employee engagement and enablement consider the gains Asia and indeed,
conducted by Hay Group Insight (the Indonesia, has made in the past 5 years on
employee survey division of Hay Group), the backs of only 16% of the workforce
frustrated employees represent an feeling effective, then how much more
astounding 29 per cent, or nearly one-third could we have achieved if we had moved
of the Asian workforce today (Figure 1). the frustrated population of 29% into the
effective category?
If nothing is done to deal with the
frustrated population, what usually The highest percentage (35 per cent) of
happens is two in three will become Asian employees was found to be detached.
ineffective and the rest will just leave. These are the employees who perform the
bare minimum of what is needed and no
more. What is worrying about detached
employees, despite the high level of
support for success that companies have
invested in them, is that their commitment
and motivation remain low.
Figure 1: Employee engagement and enablement: a comparison of Asia versus West
Employee Engagement - Asia
employee enablement employee enablement
“Detached” “Effective”
Above-average
I am enabled to be productive I’m am enabled to be productive
Employee Enablement - Asia
but not particularly engaged and highly engaged
35% West = 28% 16% West = 39%
“Ineffective” “Frustrated”
Below-average
I am not enabled to be productive I am not enabled to be productive
and not particularly engaged even though I am highly engaged
20% West = 12% 29% West = 21%
Below-average engagement Above-average engagement
Source: Hay Group Insight, 2010
©2012 Hay Group. All rights reserved

3. 3
Figure 2: Hay Group’s Employee effectiveness framework
Employee Effectiveness Framework
 Clear and promising
direction
Confidence in leaders
Employee Engagement
 Results
 Quality and customer focus  Commitment
 Respect and recognition  Discretionary effort
Productivity
 Development opportunities
 Pay and benefits
Financial performance
Drivers
Employee Attract and retain talent
Effectiveness
 Performance management Customer loyalty
 Authority and empowerment
Employee Enablement
 Resources Innovation
 Optimized roles
 Training
 Collaboration  Supportive
Enhanced corporate
 Work, structure, & process environment reputation
With various innovative HR tools, What is the bottom-line impact and
including incentive pay, perks and career opportunity cost?
advancement prospects to engage today’s
employees, why is employee frustration Our research shows that companies that
continuing to impede performance in the engage and enable their employees out-
workplace? performed their industry peers on revenue
growth by 4.5 times. In terms of profit-
According to our research (Figure 2), ability, such companies exceeded industry
workplace frustration appears to stem from averages in terms of five-year Return on
the lack of employee empowerment and Assets, Return on Investment and Return
enablement. While work remains on Equity by 40% to 60%. This level of
challenging, the lack of empowerment to performance is not to be sneered at, in any
make decisions and the lack of enablement sort of economic climate.
to perform effectively is causing
significant numbers of employees in Asia to Or look at it another way. While CEOs
feel frustrated. make promises about what their
organization can deliver to customers,
shareholders and other stakeholders, it is
the employees who keep these promises
on their behalf. Do we really want to put
detached or ineffective employees in front
of our clients and investors?
www.haygroup.com/id

4. 4
Leading Indonesian companies
Money can’t buy love Climate change is good for you
Knowing what makes up employee Let us now turn to the kind of
effectiveness, let us look at what makes our organizational climate that leaders are
employees tick. Figure 3 shows the top five creating in Indonesia. Figure 4 show the
reasons why employees in Asia leave us. gap between the ideal and reality in terms
of the six factors of organizational climate.
A quick analysis of Figure 3 immediately
confirms that saying “people join The biggest gaps in organizational climate
companies, but leave their boss”. have to do with clarity and flexibility.
Common reasons across the three Employees want to know how their
generations are: responsibilities, functions and/or projects
are connected to the company’s objectives.
• Lack of recognition And they want the flexibility to determine
• Ineffectual direct manager/supervisor how their work is to be carried out; this
brings us back to our earlier discussion
• Uncompetitive pay
on employee enablement. In other words,
what they are saying is “tell me what needs
Out of the top five reasons for leaving, to be done and how it is connected to
only one has to do with money itself. The our goals. Then give me the tools to get it
rest are about how the employees are done. Oh and please get out of my way.”
managed by the direct supervisor, how
valued they feel and whether they think “We need to be clear about our
that that their career is going somewhere expectations and the entire leadership
within the organization. team must be sending the same message,”
said Mr Joseph Bataona, Director of Bank
In other words, both the Baby Boom- Danamon.
ers and Generation Xers want to work in
organizations where their contribution is
valued and recognized by top management.
It really boils down to the leadership and
the organizational climate that they
experience.
©2012 Hay Group. All rights reserved

5. 5
Figure 3: Why employees leave
Baby Boomers Generation X Generation Y
Limited growth
External inequity of
Lack of recognition opportunities in the
compensation
organization
Limited growth
Direct supervisor’s External inequity of
opportunities in the
management style compensation
organization
Performance Lack of career development
Lack of recognition
assessments program
Lack of career
Business instability Lack of recognition
development program
External & internal Direct supervisor’s Direct supervisor’s
inequity of compensation management style management style
Baby Boomer : 1940s – 1959 (age 50 ~ 69 years) Source: Hay Group Productized Services
Generation X : 1960s – 1979 (age 30 ~ 49 years)
Generation Y : after 1980s (under 30 years)
Figure 4: Organizational climate of Indonesian companies
Organizational Climate of Indonesian
Actual Ideal
Companies 27%
Gap 39% 30% 38% 40% 35%
100 100
90 90
80 80
70 70
60 60
Percentile
50 50
Score
40 40
30 30
20 20
10 10
0 0
Source: Hay Group Productized Services
www.haygroup.com/id

6. 6
Leading Indonesian companies
Right situation, right style
Now let’s look at the leadership styles Effective leaders are adept at all six
of Indonesian leaders. Hay Group has leadership styles and can switch from one
identified six leadership styles that apply style to another, depending on the
all around the world – affiliative, coaching, circumstances. But, typically, managers will
coercive, democratic, pacesetting and default to the style they are most
visionary (Figure 5). comfortable with, especially in times of
crisis and stress.
The dominant style of Indonesia’s leaders
is coercive, with coaching and affiliative as As pointed by Mr Jajha Setiaatmadja,
the secondary or back-up (Figure 6). President Director & CEO of Bank
Central Asia, “We must know many ways
The good news is that there is no one best to manage people. They are not the same.”
style of leadership – each has its strengths
and limitations and is appropriate to As to what works best in Indonesia, Mr
certain situations. For instance, the Ketut Budi Wijaya, CEO of Lippo
coercive approach is useful in getting an Karawaci commented, “even when you
organization through the economic crisis, provide critique, it must be done in a
but will stifle initiative and innovation in harmonious and non-confrontational
the good times. The affiliative style is most manner.”
suitable for dealing with emotional
situations, like when breaking bad news to
employees.
Figure 5: Hay Group’s six leadership styles
Coercive leaders expect immediate compliance. They rely on negative
Coercive
corrective feedback and focus on negative consequences.
Such leaders set the big picture and move their teams towards a shared
Visionary vision. They sell “visions” as the keys to long-term success by explaining
the “whys”.
Affiliative leaders are concerned with creating harmony and promoting
Affiliative friendly relations. They are likely to avoid performance-related
confrontations.
Such leaders are democratic individuals who believe in building
Democratic commitment through consensus. They invite employees to generate
new ideas and develop directions for themselves and the company.
Pacesetting leaders have high expectations and are apprehensive about
Pacesetting work delegation. They have no sympathy for poor performance, and are
likely to do a job themselves if high performance is not forthcoming.
Coaching leaders focus on the professional development of
employees. They help employees identify their strengths and
Coaching
weaknesses, and encourage the achievement of long-term goals
through instruction and feedback.
©2012 Hay Group. All rights reserved

7. 7
The CEO challenge
Today’s leaders are expected to play multifaceted roles: visionary
chief, astute decision-maker, brilliant strategist, team captain and
inspirational boss. And they are expected to do all these effortlessly.
And while there is much that we can learn To stand shoulder-to-shoulder with
from the West in terms of business and Indonesia’s Most Admired Companies,
talent management, particularly in the Indonesia’s top executives need to increase
areas of leadership and empowerment, it their repertoire of leadership styles. They
must be tampered by an understanding of must provide clarity, create the right
how Indonesia works. organizational climate for greater
delegation of authority and power, and
“You start with the Western approach invest in the right processes for accelerated
because it‘s proven. But we have our leadership selection and development. But
Indonesian culture to consider too,“ within the context of Indonesia’s culture of
advised Mr Emirsyah Satar, CEO of harmony, loyalty and consensus.
Garuda Indonesia.
A vast amount of latent potential lies
Mr Roberto Feliciano, CEO of First Media waiting to be unleashed in Indonesia.
and Director of Lippo Group added, While companies like Astra International
“We try to balance Western management and Garuda have taken bold strides
approach with an Eastern philosophy of towards breakthrough change, it is time for
building consensus and loyalty. others to bridge the gap by helping their
leaders to behave in ways that encourage,
rather than drive people to sustainable
performance.
Figure 6: Leadership styles of Indonesian leaders
75% 53% 56% 48% 34% 58%
Leadership Styles of Indonesian Leaders
100
90
Dominant
80
70
Percentile shown
60
50
Backup
40
30
20
10
0
Source: Hay Group Productized Services
www.haygroup.com/id

8. 8
Leading Indonesian companies
This paper was first presented at Hay Group’s CEO exclusive roundtable on 25th January 2012. We have included their
comments and observations in this paper. We would like to thank the following executives for their insightful, lively and
robust participation.
Mr. Emirsyah Satar
Mr. Hendrik Weiler Mr. Hiramsyah S. Thaib
CEO Mr. Jahja Setiaatmadja
President-Director, President-Director & CEO
PT. Garuda Indonesia Tbk President-Director & CEO
PT. ABB Sakti Industri PT. Bakrieland Development
PT. Bank Central Asia, Tbk
Tbk
Mr. Kartika Wirjoatmodjo Mr. Ketut Budi Wijaya Mr. Prijono Sugiarto Mr.Rinaldi Firmansyah
President-Director CEO President Director & CEO President-Director
PT. Indonesia Infrastructure PT. Lippo Karawaci Tbk PT. Astra International Tbk PT. Telekomunikasi Indonesia,
Finance
Tbk
Mr. Roberto Feliciano Mr. Sachin Gopalan Mr. Susanto Djaja Mr. Stuart L Dean
CEO / Director COO CEO President & CEO
PT. First Media / Lippo Group Berita Satu Media Holdings PT. Metrodata Electronics, Tbk GE ASEAN
Contact the author
Nidthia Chelvam, Managing Consultant for Hay Group
Indonesia, helps multi-national companies and
international organizations transform their
business strategies into results.
Nidthia also has extensive line and operational
management experience with global companies
across three continents.
e| Nidthia.Chelvam@haygroup.com
The content in this report is provided solely for informational purposes. This report does not establish any client, advisory, fiduciary or professional relationship between Hay Group and you.
Neither Hay Group nor any other person is, in connection with this report, engaged in rendering accounting, advisory, auditing, consulting, legal, tax or other professional services or advice.
©2012 Hay Group. All rights reserved