Developing a (new) culture

The Jakarta Post ,  Jakarta   |  Wed, 05/24/2006 12:20 PM

Budi W. Soetjipto, Jakarta

A company's corporate culture is what determines its success. On the other hand, the business environment is becoming more turbulent. To ensure its success, a company must be flexible enough to ride such a dynamic environment.

However, a company cannot be flexible unless its culture is also flexible. The question is, how flexible can a firm's corporate culture be? To answer this question we must first understand that corporate culture encompasses norms and values that may take years to develop.

The longer the period, the stronger the culture. Additionally, the development of a business' corporate culture in the earlier stages may frame the development in later stages. Therefore, corporate culture is historical in nature, and that makes a strong culture, characterized by a long history and a strong framing, inflexible.

This is the case for PT Perkebunan Nusantara III (Persero), a state-owned agricultural company in North Sumatra that grows mainly oil palms and rubber trees. Known as PTPN III, this company has a very long history, dating back to 1868 when it was called De Deli Maatschappij.

It was a Dutch company before it was taken over by the Indonesian government shortly after the transfer of power in 1949. During those many years, the company developed a culture that was pretty much production-oriented.

Such a culture is understandable considering that during that period of time demand for the company's products exceeded supply. The opposite, however, exists these days as the competitive forces grow, especially between rivals (e.g. Indonesia and Malaysia) and alternative products (e.g. sunflower seeds).

The problem is the production-oriented culture that has stuck for almost a century makes it really hard for PTPN III to change to a more market-oriented culture. In that regard, the old culture has framed the company and, hence, is the cause of the company's inflexibility.

This puts companies like PTPN III at a crossroads. On one hand, the market has changed and become more turbulent, thus requiring the companies to adjust. On the other hand, the companies have maintained a particular culture for a number of years, keeping them in their comfort zone. Who would want to change such enjoyable circumstances?

Nonetheless, the companies have to change, or else they may not survive stiff competition. If there is a gap between the needed (new) and the existing (old) culture, the top management team (TMT) should play a vital role in leading the company to a new culture.

TMT has to send a strong message to all employees that the company has no other choice but to change the existing culture to a market-driven one, which means leaving its comfort zone.

In PTPN III's case, that is what Akmaluddin Hasibuan (the president director) and his fellow directors have done. In 2003, they established what they call a ""business transformation program"" (program transformasi bisnis).

More specifically, this program encompasses more than just corporate culture; it includes redefinition of mission and vision, reformulation of corporate strategy, redesign of organization structure, and simplification of business processes.

Its business transformation program is implemented through five strategic initiatives: competency-based human resource management, total quality management, activity-based costing, customer relations management, and quest for innovation.

Referring to Edward Lee Thorndike's law of effect, these initiatives act as antecedents (precondition) for behavioral (cultural) change. To stay competitive, a company, however, must maintain and sustain the change.

Accordingly, the company must provide consequences. In operational terms, the company must establish performance management and compensation systems so the employees who adopt the new culture will be well recognized and rewarded.

This recognition and reward positively reinforces employees to adopt further change, or act as antecedents for future behavioral change. In other words, recognition and reward produce a chain of continuous change, whereby change generates more change and eventually creates flexibility in the company.

Through time, the chain of continuous change can break the historical habits that have framed the employees' behavior. These employees may no longer engage in the old habits without having to forget the history. Additionally, the chain will free the change program from the dependency on TMT. Thus, if there is a change in top management, the program will remain intact.

Such an independency is important considering there are several cases in which the change failed when a member of top management left the company. One such case is PT Telekomunikasi Indonesia Tbk (Telkom). Its change efforts went nowhere when the late Cacuk Sudarijanto was removed from the position of president director of the company.

A similar thing could happen at PTPN III. My colleagues and I came to suspect this when we held talks with the company's managers and employees. We sensed their concern about the future of PTB should Akmaluddin leave the company.

That kind of concern confirms the need for PTPN III and other companies like it to have performance management and compensation systems to complete the chain of continuous change. Such systems could lead PTPN III away from becoming Telkom part two.

The writer is managing director of the Management Institute, Faculty of Economics, University of Indonesia. He and his team have helped PTPN III maneuver the change process.

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