Generations clash in Indonesia’s family firms

Generations clash in Indonesia’s family firms
Published: 
August 2014

Traditional businesses in Indonesia are facing a fresh challenge, as the new generation of graduates exposed to western ideas are starting to rebel against authoritarian management styles and the subservient role expected of them.

With a GDP the same size as Turkey or the Netherlands and a growth rate of 6.5 per cent a year, Indonesia is predicted to be the world’s fourth largest economy by 2050. As it undergoes rapid industrialisation, the country is also increasingly attracting foreign investment interest.

However alongside the western models of management established during 350 years of Dutch rule, the old feudal structures and traditions are still strong.

More than 95 per cent of businesses in Indonesia are family owned. Employees often have little protection – two-thirds work on a contract basis, with no entitlement to health benefits or leave periods. Their role is one of subservience, with little say in decision making.

Now a new generation of young Indonesian professionals – many educated at western universities – are starting to challenge the established order. After returning home to find a job, graduates often find that their workplace and their managers fail to meet their expectations and many choose to resign.

According to Ms Fitri Oktaviani, an Indonesian academic who was a research student at UQ Business School, tensions between young professionals and their bosses represent a culture clash between old and new values, one that could potentially damage traditional industries because of higher staff turnover and a reluctance by educated younger people to be employed in them.

As part of her research project, conducted with assistance from UQ Business School’s Associate Professor in Management, Bernard McKenna, Ms Oktaviani interviewed 19 Indonesian professionals from different locations and industries who had recently resigned. She found that they all had similar criticisms of their former leaders. Common reasons for resigning were that their former leaders were unfair, inflexible, that they lacked appreciation and understanding, had poor communication skills, or in some instances were insincere and untrustworthy.

Ms Oktaviani points out that cultural concepts play a part in some of these issues – for example, the ‘respect’ for leaders which is expected of staff. “In Indonesia, obedience is considered a good moral virtue that should be displayed by members to their leaders while independence and critical thinking are seen as unfavourable,” she explains.

Interviewees, however, were clearly frustrated by a lack of autonomy, bosses’ failure to take their views into account, and the obligation to follow orders even where they disagreed with them or considered them unethical. In the interviews, they expressed their sense of powerlessness with phrases such as ‘he is the boss, he can do everything’, ‘if that is what she wants—we cannot do otherwise’, or ‘he is the God’.

Another common theme was leaders’ inability to communicate clearly, which often led to misunderstandings and uncertainty amongst employees – in some cases, causing them to make errors which were then blamed on their incompetence.

One marketing officer in a medium-sized bank said of his former supervisor: “He was never clear about what he expected from us, well … sometimes he knew what he wanted but he just did not tell us. It was dangerous … especially for those newbies.”

Ms Oktaviani believes this also stems from cultural factors. “Participants regarded ‘clarity’ and ‘directness’ as very important, whereas traditionally, Indonesians, especially the Javanese, are an indirect speaking community,” she says.

“Indirectness is culturally important as a form of politeness that is preferable to straightforwardness, especially when expressing criticism. Traditionally supervisors would tell a subordinate’s colleagues about their mistake so that colleagues could convey the message.”

However, despite coming from the same culture, the graduates often viewed this indirectness as sly or as evidence of a hidden agenda. They would have preferred to receive criticism directly from their supervisor.

Those who had worked in family businesses complained that the families tended to seek unfair benefit at the expense of employees – for example by demanding that they carry out free work for the family in addition to their regular work.

According to Ms Oktaviani, the rules are less clear for those employed by family businesses as they are not enforced as strictly as in the public sector.

One woman related the story of a colleague who was pregnant with her second child and requested additional time off because of problems with the pregnancy. She received three months’ unpaid leave in place of a month’s paid leave but had to pay a fine. The boss said she had deceived him because when he had questioned her after the first baby, she told him she was not planning to have another.

Meanwhile those who had worked in the public sector saw their leaders as ‘selfish’, ‘arrogant’ and seeking personal economic benefit. They complained that discrimination and inequality were commonplace but camouflaged by policies and procedures. Leaders justified unethical behavior using imperatives such as ‘budgets’, ‘accountability’ and ‘efficiency’ and young professionals who challenged them were told it was not in their job description to question leaders’ actions or was ‘beyond their authority’.

Ms Oktaviani believes that family businesses need to reform or risk extinction in the new era of global capitalism and she hopes that both private and public sector leaders will learn from the resignations. She says that firms need to open up to the new knowledge that younger professionals bring, and seize opportunities to boost productivity and innovation.

She would like to see workers given greater autonomy and a business culture that truly abides by the Pancasila – the moral principles which are the philosophical basis of Indonesian society and which aspire to provide Indonesians with ‘an equal and just opportunity to earn their livelihood’.

“By enacting the principles of its nationhood in employment relations, Indonesia could provide a model of wise leadership for other Asian nations to follow,” she says.

According to Associate Professor Bernard McKenna, the research highlights a generation gap which has wider implications for the future of business leadership in Indonesia. “Because of their professional education and use of social media, generations X and Y have been more exposed to western values,” he says.

“They have different views on issues such as respect and equality and are more critical of organisations. These young workers also witnessed the failure of authoritarian leadership with the fall of Suharto in 1998 and have different expectations of leaders’ behaviour.

“The challenge now is for Indonesia’s business leaders to find a new way forward, and build a new business culture that takes account of Indonesian values and the views of young and old, and one that will provide a firm foundation for Indonesia to successfully develop its economy in the years to come.”