Challenges to HR management in Indonesia

June 9, 201512:05 pm6142 views

Indonesia’s digital boom offers plentiful opportunities for venture capitalists, investors and fresh graduates from universities across the globe. As opportunities increase, the challenges to HR management in Indonesia increase with time.

However, the Indonesian market is not sufficiently mature to accept sudden changes in HR practices, which are increasingly seeing automation and the use of HR software in MNCs. .

Some key challenges that HR professionals in Indonesia encounter in their day-to-day functioning are:

  • Lack of talented skilled graduates

Unlike the US, graduates from Indonesian universities lack quality education, partially caused because of lack of standardisation in educational mediums and regulations. With few good universities, most talented graduates are hired by reputed companies even before graduation.

The top companies actually start their branding activities and hiring campaigns to recruit the top talent right at the beginning of the final year of student graduation. Some employer branding activities includes business competitions, scholarships, training, funded project assignments and other activities designed to generate mindshare.

Hence, this talented lot of fresh graduates would always prefer working for the top employer, instead of joining start-ups for nominal wages.

  • Lack of stability in middle-level management

Mi-level executives normally desire stability in their careers and jobs. Blue chip companies offer better facilities and stability for employees to hold on to their jobs and benefits. Some of these benefits are loans for apartment ownership, utility vehicle loans, medical allowances and support for families of employees etc.

By comparison, startup ventures and SMEs find it difficult to offer employees such package deals. Hence, Indonesian startups are generally perceived as an establishment that has no stability and can be collapsed anytime.

Also tenure put into service by companies of repute is measured as against the startups, those who have just commenced their journey to establish standards of repute with not more than 5 years under their belt.

See: Employment agencies threaten to stop sending Indonesian workers

  • Sungkan Culture

Many Indonesian companies still follow the Sungkan culture at work. This means indirect communication and actions performed by managers, because of due respect for other people. This further translates into, for example, an employee showcasing poor performance at work cannot be fired openly or reproved. Whereas, in start-ups, they do not believe in Sungkan culture and are open to firing underperformers.

  • Elevated levels of collectivism

Collectivism is defined as a social model wherein members of a group are more concerned about protecting interests of their group, over their own individual interests. Cooperation is valued more than competition in collectivist environments and group preferences take precedence over an individual’s interests.

The core values that make up for this collectivist group culture include embedding social to form collective identity group of solidarity and group decision making is respected over an individual’s take on situations. Frequent social activities like family get-togethers also impact productivity at work and lowers down expectations of growth.

The business and investment climate in Indonesia face challenges owing to trade liberalisation, CAFTA and AFTA. If this isn’t enough coping with the low quality of human resources that are not technically competent to adapt with emerging technologies in the HR space is another challenge.

In conclusion

When it comes to meeting requirements of Indonesian markets, HR experts and practitioners have come to terms with the fact that Strategic Human Resource Management (SHRM) is the key in accelerating direct positive impact on performance.

There are many factors that inhibit productivity at businesses in Indonesia, which is termed as the “black box”. There is an increasing need for better clarification on black-boxes that exist between SHRM and company performance relationships.

According to a recent report, “Indonesia’s Human Development Index scores 170 among 177 countries in the world. This position reveals that Indonesia’s quality of human resources is lagging behind other countries in the region, even those we consider less developed than Indonesia.”

As the ASEAN economy opens up new avenues for business opportunities, Indonesia is slow in synchronising with the trends and human capital deficits.

This is a serious wake up call to the Indonesian economy and the HR industry in Indonesia to care for employees and provide quality skilled workforce. The future of Indonesia is reliant on the growth of small enterprises and start-ups of today, with strong human capital as their foundation for success.

Also read: Foreign Workers in Indonesia ‘Must Take Local Language Test’

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