Early in the twentieth century, businessman William Kettering observed that, “The biggest job we have as managers is to teach a newly hired employee to fail intelligently… to experiment over and over again until they learn what works.” His observation remains relevant today, but the way organisations develop employees has changed considerably.
Performance management has evolved significantly over the past two decades. Many multinational companies have moved away from relying solely on annual performance reviews in favour of continuous coaching, regular one-on-one discussions, quarterly check-ins, and ongoing feedback. Even so, foreign companies operating in Indonesia often discover that cultural differences continue to influence how performance discussions are received.
This topic arises in nearly every cross-cultural management programme conducted for foreign managers working in Indonesia. Many international organisations have well-established global performance management systems and expect their Indonesian operations to follow the same process. The challenge is not whether performance reviews should exist, but how they should be implemented in a way that aligns with both corporate standards and Indonesian workplace culture.
Understanding the Cultural Challenge
One of the biggest challenges involves communication.
Indonesian workplaces generally place a high value on maintaining harmonious working relationships. Constructive criticism is often delivered indirectly and privately, with an emphasis on preserving the dignity and “face” of everyone involved. Direct confrontation, particularly in front of others, is usually avoided.
Western managers often expect candid discussions about strengths and weaknesses. Indonesian employees may instead interpret direct criticism as a sign that the relationship with their supervisor has deteriorated rather than as an opportunity for improvement.
While younger professionals working in multinational environments are increasingly accustomed to direct feedback, managers should not assume that every employee will interpret performance discussions in the same way.
Why Annual Reviews Can Be Difficult
When feedback has not been provided throughout the year, an annual review can become an uncomfortable experience.
Employees may arrive uncertain about the purpose of the meeting or worried that negative comments indicate serious problems with their future in the company.
Managers usually have little difficulty discussing achievements and positive contributions. The conversation often becomes more difficult when improvement areas are introduced. Employees may become defensive, withdrawn, or anxious, asking questions such as:
“I didn’t realise there was a problem.”
“Have I disappointed you?”
“Does this mean you want me to leave?”
The manager then spends much of the meeting explaining that the purpose is employee development rather than punishment.
This situation is largely avoidable when managers provide regular coaching and timely feedback throughout the year.
The Importance of Continuous Feedback
Rather than allowing concerns to accumulate until an annual appraisal, many successful companies in Indonesia encourage supervisors to provide frequent coaching conversations throughout the year.
Addressing issues while they are still small allows employees to improve immediately and avoids unpleasant surprises during formal reviews.
When regular feedback becomes part of everyday management, the annual appraisal becomes a summary of ongoing discussions instead of the first time difficult topics are raised.
The Manager’s Dilemma
Another challenge is that some Indonesian supervisors remain reluctant to document poor performance formally.
It is not uncommon for an expatriate manager to hear repeated verbal complaints from an Indonesian manager about one of their staff members, only to receive a written performance appraisal later describing that same employee as performing well.
The reluctance often comes from a desire to preserve relationships, avoid conflict, or prevent an employee from losing face. While understandable from a cultural perspective, it can create significant management problems when formal documentation is required.
Implementing Global Performance Systems
For many multinational companies, the decision to conduct annual performance reviews is made at regional or global headquarters rather than within Indonesia.
In these situations, organisations generally adopt one of three approaches.
The first is simply to comply with headquarters’ requirements while making it clear that the process has little impact locally. Although this satisfies administrative requirements, it significantly reduces the value of the system.
The second approach uses performance reviews primarily as a development tool. Evaluations identify training needs, coaching opportunities, career planning, and professional development. Many organisations have found this to be the most culturally comfortable approach.
The third approach fully integrates performance reviews into promotions, bonuses, succession planning, and compensation decisions. This approach can be very effective but requires strong leadership commitment, clear communication, consistent implementation, and extensive manager training.
Introducing the Process Gradually
If an organisation is introducing a formal performance management system for the first time, gradual implementation remains good practice.
Employees should first understand:
- why the organisation is introducing the process
- what criteria will be used
- how performance will be measured
- how the information will affect career development and compensation
Managers themselves also require training. Delivering constructive feedback respectfully, setting measurable goals, documenting discussions, and conducting coaching conversations are all learned management skills.
Linking Reviews to Compensation
Performance-based bonuses have become much more common in Indonesia than they were twenty years ago, particularly in multinational companies and larger Indonesian corporations.
However, organisations should still recognise that strong individual rewards can sometimes create unintended tension if employees perceive the process as inconsistent or unfair.
Transparency, clearly defined objectives, measurable performance indicators, and consistent application across departments are essential for maintaining trust.
Many successful companies balance individual achievement with team performance, recognising both personal contribution and collaborative success.
Confidentiality and Workplace Discussions
Managers should also recognise that salary and bonus information often becomes known informally within the workplace.
Whether accurate or not, employees frequently compare compensation, bonuses, and promotions. If performance ratings influence financial rewards, managers should be prepared to explain clearly how decisions were reached.
Employees who perceive unfairness may appeal to senior management or utilise formal grievance procedures available within the organisation. In some situations, disputes may also involve Indonesia’s labour dispute mechanisms.
Consistent documentation and objective performance criteria help reduce misunderstandings and strengthen management decisions.
Finding the Right Balance
Performance management is an important leadership responsibility regardless of culture. The challenge is adapting global management practices to local expectations without compromising organisational standards.
In Indonesia, companies are generally most successful when they:
- provide regular coaching throughout the year
- avoid surprising employees during formal reviews
- train managers in giving culturally appropriate feedback
- use measurable performance criteria
- focus equally on employee development and business performance
- communicate openly about how performance evaluations influence career progression
When implemented thoughtfully, performance management becomes less about criticism and more about building employee capability, strengthening trust, and improving organisational performance.
Annual performance reviews remain a valuable management tool—but only when they are supported by continuous communication, consistent leadership, and an understanding of Indonesia’s relationship-oriented business culture.
By George B. Whitfield III
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.
