Thursday, April 19, 2007

Going Global: The Way Forward to Indonesian Companies

The title is exactly what appeared on The Jakarta Post (April 18, 2007) in Management Section. My boss wrote it. You can either read it on... or follow this link.

The article was based on research and work done by Fortune magazine in partneship with Hay Group, titled "What Makes the Most Admired Companies Great". It explored the study on corporate reputations among Fortune 1,000 and Global 500 companies. We separated the rankings of the World's and America's Most Admired Companies based on 9 attributes as follow:

  • Ability to attract and retain talented people
  • Quality of management
  • Quality of products and services
  • Innovativeness
  • Long-term investment value
  • Financial soundness
  • Wise use of corporate assets
  • Social responsibility to the community and the environment
  • Effectiveness in conducting business globally

The results are very interesting and provide insights to survive the global competitive world. Do you know who's The Overall "All Stars" for 2007? *smile* It's General Electric for both World's Most Admired and America's Most Admired!

And here comes the complete list....

World's Most Admired
1. General Electric
2. Toyota Motor
3. Procter & Gamble
4. Johnson & Johnson
5. Apple
6. Berkshire Hathaway
7. FedEx
8. Microsoft
9. BMW
10. PepsiCo

America's Most Admired
1. General Electric
2. Starbucks
3. Toyota Motor
4. Berkshire Hathaway
5. Southwest Airlines
6. FedEx
7. Apple
8. Google
9. Johnson & Johnson
10. Procter & Gamble

Top Non-US Companies
1. Toyota Motor
2. BMW
3. Singapore Airlines
4. Nokia
5. Honda Motor
6. Nestle
7. Toyota Industries
8. Tesco
9. Samsung Electronics
10. BP

"Boards of Most Admired Companies are not only demanding a more significant role in the succession planning process, they are devoting much more time and effort to it than other boards are. Increasingly, 'rigor' has replaced 'rolodex' as the watchword in CEO succession planning. The best boards aren't looking for a rolodex of outside candidates whe it comes to the corner office; they are looking for rigorous processes to help them develop and assess their interal executive talent to make smart decisions about corporate leadership."
Beverly A. Behan
Managing Director
Board Effectiveness Practice, Hay Group

"My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too."
Jack Welch
Former CEO - General Electric

"The people we hire, and the focus we put on their development as leaders, are critical to P&G's ability to innovate and compete. Nothing I do will have a more enduring impact on P&G's long-term success than helping to develop other leaders."
A.G. Lafley
Chairman and CEO - Procter & Gamble

And, if you want to know more... you can contact us at Hay Group.

Going Global: The way forward for Indonesian companies

Supplement - April 18, 2007

Each year, Fortune magazine publishes its list of the world's most admired companies, based on a detailed survey of prominent business figures across a range of industries. Produced in partnership with the Hay Group, the survey asks participants to assess their peers in terms of global readiness, innovation, employee talent, use of corporate assets, social responsibility, financial soundness, long term investment, quality of products and services and quality of management.

Inclusion in the list garners more than mere prestige -- since its inception 10 years ago, shareholder returns for the "World's Most Admired Companies" have regularly exceeded the Standard and Poor 500 index.

Yet in Asia, only companies from Japan and South Korea make the top 50, while emerging economic giants China and India are conspicuously absent from the list, as are companies from Indonesia, Malaysia and Thailand. Chinese companies are widely seen as the new rising stars of the business world, but, while 19 rank among the Fortune 500, the World's Most Admired Companies List still eludes them.

So what can Asian -- and in particular Indonesian -- companies do in order to take this leap onto the global arena? A challenge that Indonesia faces today is the search for leadership. Since the financial crisis and the subsequent collapse of established corporations, the nation is still waiting for business leaders it can trust.

We believe that some of Indonesia's reputable organizations like Sampoerna, Bank Mandiri, Astra International, Medco Energy Group and Telkom have what it takes to become global firms. What makes them stand out is that they are able to attract, retain and develop talented people. Procter & Gamble (P&G) President Alan Lafley spends as much as half his time on fostering talent. For him, it is the crucial factor that saw P&G place 3rd overall in Fortune's list. With the support of effective human resource professionals, Indonesian companies can also become global players to be reckoned with.

Research indicates that the world's most admired companies apply strict quality criteria for their leading people, by which they can measure efficacy. Criteria vary according to the strategic requirements of the company, but they are applied at every level of staff development, from recruitment through selection, fostering, performance assessment and promotion of leaders.

In Indonesia we see many companies spending their entire talent development budget on many people. While this is good for unity and morale, the impact on revenue and profitability is relatively low considering the outlay. Our work with clients here indicates that the best-performing companies are the ones who identify a few critical "tipping-point" talents and choose to invest heavily on them instead. These people will be the leaders who take their companies to the next level.

The Hay Group's research indicates that it is crucial to identify and develop talented people at organizational and team levels, not just at the individual level. Companies on Fortune's list use a range of methods to develop their staff, including coaching, pre-planned job development programs, rotational training and assessment and tailored training rather than a traditional one-size-fits-all approach.

Once a strong leading team keen on mutual reliance and co-operation is established, a culture of teamwork will filter through the company. Indonesia's work ethic is well-known for its co-operative and teamwork culture. What is critical is for this natural co-operation and team work to be directed towards a common purpose -- the organization's purpose.

It is the overall responsibility of the leaders to establish behavioral standards by which all must abide. Staff assessment and reward should include these behavioral factors, such as teamwork and customer orientation. If these do not exist, problems may not be discussed openly, leading to lack of consensus and confusion throughout the entire company structure.

Establishing organizational structures conducive to teamwork interdepartmental communication in the world's most admired companies is a crucial factor in delivering customer service of the highest quality. Many of these companies set up inter-agency teams whose principal functions are to solve problems for customers and provide a forum for experts and managers from different fields to brainstorm.

In Indonesia, where customers are becoming more demanding and the marketplace increasingly competitive, companies need to take a more flexible approach to organizational structure. One of our clients, a technology company, recently re-organized from traditional "functional" departments to customer-oriented teams, resulting in increased customer satisfaction and improved internal cohesion.

Companies on the Fortune list invest a great deal of time and energy in executive power development via effective communication of strategies, clear decision-making processes, appropriate authorization and requirements on employees to fulfill particular responsibilities.

In Indonesia, there is an additional challenge for some emerging companies. Having started out as family-run businesses, they are now run by second- or third-generation family members. Often educated in Europe or America, their outlook is very different from their founders. The sooner they can align their views, the better the two can leverage their different strengths to take their companies onto the international playing field.

The world's most admired companies do not restrict decision making to the senior level but rather the most appropriate level, the employee(s) with the relevant knowledge, skills and experience.

Like many Asian organizations, companies in Indonesia often have problems with appropriate authorization -- management overlap is found even at the highest levels, resulting in lack of clarity in decision-making and consequently, delays in the execution of instructions. Junior managers often have no decision making powers whatsoever, even if they're in a better position to decide on something than a senior manager who is removed from the situation and whose energy could be better employed elsewhere.

In the world's most admired companies, performance indices are correlated with company strategy and salaries with performance goals. There are clear lines of responsibility and accountability. When departments or groups are being 'jointly responsible,' the result is actually zero responsibility.

Companies need to have teeth to win against the competition. Employees need to know exactly what their responsibilities are and what they are being held accountable for. They also need to know what happens to them personally if they fail or succeed.

Finally, many Indonesian companies are pushing outwards in search of new markets, thereby exposing leaders to overseas experience. With these experienced people at the helm supported by committed employees and effective organizations, we may well see Indonesian companies appearing on Fortune's World's Most Admired Companies list. The opportunity is there and it is a goal that is wholly achievable.

Sylvano Damanik is president director of the Hay Group in Indonesia, a global management consulting firm.

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