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Do as I say, not as I do:
Annual Performance Appraisal and Evaluation in Indonesia

Early in the 20th century, businessman William Kettering commented that “the biggest job we have as managers is to teach a newly hired employee to fail intelligently ... to experiment over and over again and to keep on trying and failing until he learns what will work.” As we begin 2004, many companies are struggling with the issue of employee appraisal and evaluation. While generally adopted in most western-based business cultures, such employee review and appraisal in Indonesia can be fraught with misunderstandings as to purpose and methodology, be filled with accusations of impartiality, and be slowed by hesitation to formally criticize a subordinate.

This issue comes up in easily 95 percent of my cross-cultural training programs. American companies normally wish to establish some sort of review procedure but once they begin addressing how to actually institute the process and decide what direct benefits they wish to see, they often become bogged down. The threshold question then is whether a foreign company should even try to implement such a system. There are several cultural barriers to such a system here. Among them is the difficulty with direct communication with employees and also the ‘saving up’ of problem areas until a later time.

Direct communication is difficult for most Indonesians. Indonesians generally adopt an indirect approach to problem solving to avoid the possibility of confrontation and the disruption of office harmony. The preservation of such office harmony being a prime Indonesian business value, of course, and one often having priority over work performance. Also in Indonesia an erring employee or other problem situation is addressed as soon as possible, albeit in an indirect and non-blame pointing way, and then forgotten. To bring the subject up again at some review several months later is going to be considered inappropriate.

For these two reasons, individual performance appraisals tend to have the following pattern: An employee comes in to the meeting with some misunderstandings or perhaps anxiety about what will be discussed and how it will affect their career. The supervisor can go over the ‘good’ qualities of the employee without difficulty. However, when the supervisor begins discussing areas that ‘may need improvement’ there is normally an attitude change on the part of the employee with him or her becoming either defensive or submissive. In other words, the employee may either disagree with the supervisor’s assessment or else may ask something like “Why are you doing this to me? I thought that we had a good working relationship. I did not realize that I was letting you down so badly. Do you want me to resign?”

The supervisor then is in the position once again of explaining the purpose and objective of the assessment process. In general, annual performance evaluations and reviews tend to be disruptive to the Indonesian office. In my opinion, companies should focus on immediate feedback and reprimand, if needed, and not use the annual approach.

Another difficulty is the cultural reluctance for some Indonesian managers to formally and in writing criticize their own subordinates. I often hear the example of the expatriate manager who has had one of his direct reports complain often about the performance of his own subordinates. However, when it comes time for the annual review, the direct report submits an outstanding report on that same subordinate.

The decision to have annual performance evaluations and reviews may not be up to the Indonesian subsidiary of a multi-national company. Home office may dictate such a policy and the local company’s only choice is how to implement. There seem to be three basic approaches to this situation. First is to just go through the motions, telling your employees that ‘this is a Western thing. It will not affect your salary or career’, which basically voids the process. Second, you can use the information to provide training and education of the employees turning the evaluation process into a kind of reward system. Third and most difficult, is the attempt to fully implement and effectively use this Western evaluation tool. It can and has been successfully implemented by a number of American companies operating in Indonesia, but it does need the directed will of the top management along with allocated resources and training to be successful.

At the very least, there must be a significant training period to help your employees understand what the process is and, more importantly, how it will affect them. Year one should involve a formal introduction to the process with written, quantifiable criteria for the evaluation. Year two should include mock appraisals that do not have any effect on the career of the employee. Year three could see the first recorded appraisals. Once the process is institutionalized, new employees will be told by their colleagues about this strange and foreign system and what to expect. It then becomes part of your ‘third corporate culture.’ Any attempts to speed up the process are often seen as arbitrary and unfair.

Further, you should definitely expect such accusations of being arbitrary and unfair if you take the next step after the evaluation process and tie the appraisal into bonuses or salary increases. Such performance-based bonuses or salary increases are pretty much in direct opposition to the Indonesian business values of the group working together and maintaining office harmony. Traditionally, the ideal Indonesian employee is one who is loyal to the boss for a long time. In other words, loyalty and seniority are the prime attributes, and by loyalty, I mean personal allegiance to the boss, not to the corporate entity. Pointing out a specific employee and emphasizing the fact that he is superior to and a better employee than those he or she works with on a daily basis is going to be disruptive to the office and embarrassing to the individual.

For instance, if you have an annual office party or awards dinner for your staff and you say something like: “Now here is Budi who outperformed everyone else in our office and we are giving him a new TV.” The polite clapping of his co-workers is going to be overshadowed by thoughts of ‘traitor’ and plots for revenge against the award winner. If you bring up another employee and say ‘Now here is Bambang who has worked for our company for 10 years and we are giving him a new TV’, Bambang will bask in the limelight and his co-workers will no doubt truly admire his accomplishment. The difference being that Bambang was rewarded for seniority, while Budi was rewarded for violating basic Indonesian business values.

One should not expect the same confidentiality of salary information in Indonesia that one might expect in the home country. We joke that on the day performance bonuses are given, the employees exchange pay stubs in the canteen. Even if the situation is not that extreme, you can be sure that most people in your office know what each other has received, and those employees with more seniority may soon be in your office asking for a bigger bonus or larger salary increase.

You may then once again be explaining the company’s policy on performance appraisals and evaluation but this time be met with defensive and even hostile disagreement as to whom was the better worker. Allegations that the company’s criteria for awarding bonuses or salary increases is unfair and arbitrary and lacks understanding of the situation in Indonesia may be made. Employees have certainly used the conflict resolution strategy of ‘appeal to authority’ to resolve these disagreements going to the country manager complaining that their supervisor is acting improperly. There have also been cases of employees going to Indonesian government departments like Manpower or Immigration complaining about their expatriate supervisor. With the current priorities in these departments, such complains have resulted in the early repatriation of expatriate supervisors.

The process of annual performance appraisal and evaluation of Indonesian employees is not one that foreign companies should enter into lightly. The implementation of this very Western-based management tool should be well thought out and supported by top management. Alternatives exist that may be better suited to your company’s long-term success in Indonesia. Encouraging employee performance and addressing areas of weakness remain a good manager’s obligations to his subordinates. The question to be asked is what method works best for you.

George B. Whitfield III is a Technical Advisor with Executive Orientation Services of Jakarta. EOS is a cross-cultural training company specialising in the corporate cultural integration of foreign and Indonesian management teams and staff.