Changing Organizational Culture: A Powerful Way to Bring Equal Prosperity for Indonesia
The only constant in life is change. It is probably one of the most popular jargon we heard everywhere at this point. We have to admit that in this era of rapidly growing in economy, technology, and globalization, change has become an unavoidable power.
Facing this dynamic global environment, Indonesia, as one of the biggest developing country, has been managed to maintain a steady performance on the economic growth since it’s recovery from the financial crisis in 1997-1998. According to the World Bank, as stated in a research by the Ministry of Finance (Sinulingga 2015), Indonesia Gross Domestic Product (GDP) has been growing at 5,8% on average in the last five years, indicates the increase in output and employment created, thus resulting a significant decrease on the level of poverty.
Nevertheless, if we take our time walking around in the capital city of Indonesia, Jakarta, we can easily find poor people, unemployed, asking for our money on the street. Furthermore, in many other places in Indonesia, especially outside the Java Island, we will find another surprising condition, where people are still running around without clothes, and children have to swim across a river only to reach their school.
These kinds of situation seem to show that the decreasing level of poverty in this country is not being shared to all society. Supporting this statement, a research by Harvard Kennedy School (2013) states that despite of its economic growth, the inequality in Indonesia has raised sharply. Measured by the Gini coefficient, the income inequality has increased and both the Java/Off-Java divide and the urban/rural gap have intensified. Approximately half of Indonesia’s population is left behind and not sharing the nation’s growing prosperity. Consequently, it suggests the Government of Indonesia to create conditions so that all Indonesians can be a part of the economic growth and obtain benefit from it, substantively and continuously. The whole nation will have to be persistent and determine to raise the productivity, using all of its productive factors, especially labor, as it becomes and remains more competitive.
Challenges for Indonesia
As recommended above, in order to address the inequality problem, the whole nation should increase productivity through the capability of the organizations in all corners of it. This means that all kind of organizations, whether it is industrial, social, educational, or even governmental; have to enhance their capability to deliver the value proposition of the organization in more effective ways, especially to face another upcoming challenge regarding the implementation of ASEAN Economic Community (AEC) by the end of 2015.
AEC, as the realization of free trading in Southeast Asia that has previously stated in the Framework Agreement on Enhancing ASEAN Economic Cooperation in 1992, can be a good opportunity for Indonesia to improve the economic growth. It will not only allow Indonesia to expand market and investment to other ASEAN countries without any limitation, but also open up chances for Indonesian manpower to work in ASEAN countries.
However, Suroso (2015) explains that these situation can be potential threats instead of opportunities if some problems remain unresolved, which are low quality of labor, lack of proper infrastructure, vulnerably industry caused by dependence on imported products, and the limitation on energy supply. Furthermore, he inferred that the government should make policies with entrepreneurial paradigm in order to adapt with this new competitive business environment. The question is: has the government espoused the entrepreneurship in its organization? Or they are still following the old mindset, which tend to be bureaucratic and conventional?
Seeing the condition of Indonesia, it is still hard to say that this country is ready for the approaching changes. As a large country with more than 250 million inhabitants, Indonesia has a great potential from numerously organizations, yet still struggling to establish productive ones with high capability to deliver values.
From industrial perspective, data from Asian Productivity Organization shows that Indonesia has a productivity level at 9,500 USD, a significantly marginal figure compared to those of its main competitors in ASEAN: Singapore and Malaysia with 92,000 USD and 33,000 USD, respectively. On the other hand, the government has not showed a satisfactory result either. Although Indonesia has been a democratic country over the last decade, it still remains fairly corrupt, even fall under the top 4 countries most corrupt in Asia, along with Pakistan, Philippines, and Vietnam (Ardiyanto, 2013).
With many problems including low productivity and corruption, we can infer that the organizations in Indonesia are still having a hard time to deliver maximum performance in order to achieve targets. Even the government of Indonesia acknowledges that its objective, which is joining the ranks of upper middle-income countries by 2025, will not be achieved with current development trajectory (Harvard Kennedy School, 2013).
If we examine further, the aforementioned problems in Indonesia have less to do with lack of resources, competitive advantage, market forces, regulation, or strategy. For example, as most Indonesian proud of, Indonesia is recognized as an agricultural country with abundant natural resources and fertile soils, yet agricultural does not have high contribution to the GDP growth (Sinulingga 2015). Another example, Papua, despite of its wealth in mineral resources, is still categorized as one of the poorest province in Indonesia. It proves that the problem of Indonesia is not the resources, but the inability to utilize its plentiful resources to create value for the society.
Not only the inability to utilize resource, Indonesia is also facing other severe problems, specifically in the governmental organizations. In it, corruption has rooted inside of the organization for a countless age and still continuing until today. This is also a confounding fact, since the law in Indonesia has been improved to combat corruption, even strictly watched by the Komisi Pemberantasan Korupsi (KPK/Corruption Eradication Commission) and other corruption eradication organizations.
To conclude, there are still many organizations in Indonesia, which do not have sufficient ability to successfully achieve their objectives and contribute to increase prosperity, both in business industry and also the government. Consequently, in order to face AEC and achieve the government’s primary development objective, the organizations in Indonesia need to change immediately.
According to Cameron & Quinn (1999), the key ingredient in creating a successful organization, whether industrial or governmental, is something intangible and difficult to identify but more powerful than the other factors listed above. The major distinguishing feature that has been highlighted as one of the most influencing factors to performance and long-term effectiveness of organizations is organizational culture, and this is probably the root cause from the organizational problems in Indonesia as explained earlier.
What is Organizational Culture?
Organizational culture is not easy to comprehend. Robbins in Sulaeman (2014) defines organizational culture as a system of shared meaning held by members that distinguishes the organization from other organization. This system of shared meaning is a set of key characteristics that the organization values. In Sulaeman, Colquitt, Lepine, & Wesson also explain it as a shared social knowledge within an organization regarding the rules, norms, and values that shape the attitudes and behaviors of its employee. Schein (1999), argues that culture exists at several levels, go from the very visible to the very tacit and invisible, artifacts, espoused values, and underlying assumptions.
Artifacts is the easiest level to observe culture. It appears as everything we can see, hear, and feel if we hang around in the organization, including the architecture, the decor, and the climate, based on how people behave toward you and toward each other.
The second level, espoused value is slightly deeper than the first one. It supposed to create an image of the organization. Values usually standardized and sometimes perceived as the organizational goals, strategies, and philosophies. However, two organizations might have similar value, for instance customer-oriented, yet have completely different physical layouts and working styles. This phenomenon shows that there is a deeper level of thought and perception driving the overt behavior, which is called underlying assumptions.
To understand underlying assumptions as the deepest level, we have to see the history of the organization. Throughout the history of the company, if the values, beliefs, and assumptions of the founders and key leaders continued to be successful in creating products and services that the market liked, these beliefs and values would gradually come to be shared and taken for granted. They then become tacit assumption and form the organizational culture.
Based on those levels, Schein conclude that culture can be understand as a pattern of shared tacit assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.
In line with this definition, in Alvesson & Sveningson (2008), Hofstede et al (1990) declares that it is common to talk of the following characteristics when referring to culture:
- Culture is holistic and refers to phenomena that cannot be reduced to single individuals
- Culture is historically related and conveyed through traditions and customs
- Culture is inert and difficult to change
- Culture is socially constructed phenomenon shared by people belonging to various groups
- Culture is soft, vague and difficult to catch
- Terms such as ‘myth’, ‘ritual’, ‘symbols’ and similar anthropological terms are commonly used to characterize culture
- Culture most commonly refers to ways of thinking, values and ideas of things rather than the concrete, objective and more visible part of an organization.
Organizational Culture in Indonesia
In addition to the definition and its levels, Schein also states that organizational cultures ultimately are embedded in the national cultures in which the organization operates. Furthermore, the deeper assumptions of the national culture come to be reflected in the organization through the cultural backgrounds of its founders, leaders, and members. In other words, an organizational culture will be greatly affected by the culture of the country, which becomes a very interesting topic in Indonesia since it has thousands of sub-culture in every region. The discussion about it in this writing will be divided into two sub-topics: the culture in industrial organization and the culture in governmental organization.