Doing business in Indonesia
by: Sjaak Pappe, Associate partner of Hofstede Insights
Three most important things for doing business in Indonesia:
1. Because of hierarchy, average masculinity, proper status and titles are important from the people on your side, ensure that you deal with the highest possible person(s) at the Indonesian side.
2. Build relations first - before trying to do any business - that should have the prospect for a long-lasting relationship. Expect a few decisions being made at the table. Do not bargain but focus on win/win possibilities. Try to have a contact on the ground because business is intimately connected with the government and because of the fluid political situation. Always keep communication open and stay in touch often but never be too direct, noisy or confrontational.
3. Be well-prepared, anticipate needs and willing to share copious amounts of information, to the degree that you can. Send information in advance in case of upcoming meetings. Send more than you normally do.
What to look for in a good partner:
- Understand the local and national political situation very well, because it can change overnight and is always fluid.
- Has good connections with the government.
- Has the proper status and therefore explore his/her formal titles, e.g. vice president is an important one, because these titles are not used as casually as in the USA.
- Has the ability and willingness to be your contact on the ground or help you find a good one.
- Has lived and or worked and or has done business in the Western world and therefore is sensitive to the direct way of communication and task orientation of most Europeans.
- Ideally advanced his/her local education abroad.
Ensure you have a another third-party contact on the ground that can check the credentials of your potential partner first.
Meetings are not platforms for making decisions together. It is only a platform for those in power to confirm what has been decided. Give clear briefings and ensure in-group harmony. Always check after meetings in private if people agree and will do what has been agreed upon. If you conduct a meeting at the site of a business partner for the first time you probably will be received in a very comfortable waiting area, which may or may not be where the meeting is conducted between you and your Indonesian partners. If this happens you are merely being sized up and your Indonesians counterparts are gatekeepers. When you serve refreshments ensure that they are served in porcelain tea sets: the use of paper, plastic or styrofoam cups shows disrespect.
If you have meetings with peers, there can be open communication and sharing of ideas. However, most meetings are formalities; information is exchanged or already made decisions are confirmed. Meetings are too risky for open problem solving and decision making given the collectivistic and hierarchical orientation in Indonesia.
You will probably need to make several visits before things really start rolling, especially if it is a new venture that you want to start. If the meeting is just the beginning of a business relationship, expect to spend most of the time sharing information about your organisation with different individuals; you may need to repeat the same things to different people. This is okay; it means that your plans are advancing to the right people, and that those you have previously met with, have approved of you and moved you on. Patience and third-party connections are key.
- Understand people are part of networks of families, clans, etc. Also, government and politics are intertwined with business.
- Indonesians are very good in playing these networks and as a European you are probably not. Have someone on the ground to help you “play this game”.
- Invest lots of time and energy in building relationships and always remain respectful to the Indonesians.
- Be aware there is no division between work-life and private-life. So be prepared to talk business at any time and any place.
- Indonesians do business with you and not primarily with your organisation, so be prepared to share a lot of personal information.
- You can be best deceived in informal private settings. Never let people “lose face” in group settings e.g. by criticising, rewarding or complimenting them openly. Do that in private. The main goal is to protect one’s position vis-à-vis one’s superiors and one’s in-group rather than goals accomplished.
Most Indonesians are faithful Muslims who pray five times a day. You will need to adjust your schedule to accommodate their needs. Usually they pray at awakening, noontime, mid afternoon, dusk and before retiring. So during a workday there will be at least two breaks for prayers. Prayers take no more than ten or fifteen minutes; any quiet and private area will do. Devout Muslims will not work on Friday, but return to work on Saturday or Sunday. Indonesia has a formal workweek Monday through Thursday, plus half a day on Friday and half a day on Saturday.
- You have to tune in your nonverbal antennae. As a Westerner, control your emotive impulses. So keep a smile and tune down emotional expression.
- Eye contact is very indirect. Only at first introductions do eyes meet. Respect is demonstrated by lowering the eyes. Subordinates do not make eye contact out of interest, but do it by averting the eyes. Eyes are used to conduct feelings in formal situations.
- Indonesians stand a little farther apart than most Europeans. Never touch beyond the soft handshake. Never speak with your hands in your pocket. Never cross your legs with your ankle over the knee.
- For women, ankle over ankle. Do not use your hands while you speak.
- Passive silence is okay, even several minutes. Do not speak with loud volume and speak slowly.
- Talk about personal interests, but not about religion, politics, complaints, or ask about family lives or income.
- Indonesians love local food, not Western food.
- Lunch is usually the main meal of the day from 1 pm onwards.
- Dinner is at 6 or 7 pm and only slightly lighter than lunch.
- Most common alcohol is beer.
- Avoid heavy drinking with Chinese Indonesians. Play on your health “problems” as an excuse.
- They use spoons and forks and not often knives.
- Never use the left hand for eating.
- The most honored position is at the middle of the table.
- Leave a bit on your plate if you do not want to be offered more, which will happen.
- Peers talk to each other and high ranks to low, but not the other way around.
How to Manage People and Build Trust
As a “benevolent and strict father figure”, especially towards junior staff, you behave paternalistically. You must be very clear in your briefings. You always have to check the work output. Show that you are in control, never say “I don’t know”. Be able to improvise.
Short Case Study
In my Texaco time, I had an Indonesian policy officer reporting to me responsible for compensation and benefits policies. She had a strong personal opinion on reward matters, but seldom expressed that to me directly when she was not clear about my point-of-view on the topic. So when she disagreed she would not tell me.
I only found out later when I heard that she was trying to influence my superiors and other influencers informally. When I confronted her with that she simply denied it, especially in meetings.
So I put out my non-verbal antenna and I learnt that when the pupils of her eyes became bigger she disagreed. That was my signal to go into action, but always in a private setting.
Then she would open up and discuss things with me. Also, I had to be clear to my internal network that complaining about me and my decisions was only to be done directly to me. So I built a network of internal informants that warned me in time about her actions. Pretty unusual for me as a Dutch person, but very effective.
Be Especially Careful With
Especially if you are Dutch: Indonesia was a Dutch-controlled area (as from 1602 on) and colony (as from 1816 on) up until 1949 – remain very respectful and humble towards the Indonesians. They are very sensitive to the blunt and direct Dutch, who of course have opinions on anything, especially the Indonesian political and governmental regime and religion. Corruption is everywhere; decide upfront what your policy is: go with it 100% or not; or go with it partly through using “agents” who are paid a fee or percentage of business deals.