I Introduction
1.1. Company Overview
PLN is the only vertically integrated state-owned utility company and the sole distributor of electricity in Indonesia with the following characteristics:
- Wholly-owned by Republic of Indonesia, represented by the Ministry of State-Owned Enterprises (MSOE).
- Also regulated by Ministry of Energy and Mineral Resources (MEMR) and finances monitored by the Ministry of Finance (MoF)
- Holder of the Electricity Business Proxy vested by legislation
- Largest electricity producer with generation capacity of about 22,725 MW, or about 80% generation capacity market share
- Sole provider of transmission and distribution (T&D) of electricity
- Employs around 50 thousands people
- Serves around 34 million customers over 1,100 systems all over Indonesia
1.2. The Crisis that Change PLN
PLN is a growing company but the economical crisis that hit the country in 1998 had challenged PT PLN to the biggest ever financial deficit. At that time, the corporate restructuring program was the only solution that was left to the company to survive. .In early year of 2000, PT PLN top management awarded the headquarters reorganization to remove bureaucracy toward the team-based through the cultural approach. The new structure was expected could improve customer service and operational efficiency, decision speed and quality, and interpersonal communication. It will also motivate the employees the chances to improve creativity and innovation that for decades could not be expressed due to the centralized and autocratic system.
Figure 1: PLN Headquarters Structure Before Restructuring
As illustrated in Figure 1, the old structure had five layers of line managers consisted of more than 400 positions. Consequently, all managers wanted to gain power, resulted in a lot of redundant tasks and too much paper-work and unnecessary but time consuming reporting requests. Many clerical employees were needed to support the managers.
The old Structures was characterized by machine Bureaucracy: highly specialized, routine operating tasks; very formalized procedures in the operating core; a proliferation of rule, regulations, and formalized communication throughout the organization; large-sized units at the operating level; reliance on the functional basis for grouping tasks; relatively centralized power for decision making; and an elaborate administrative structure with a sharp distinction between line and staff.
Employees were restricted to the functional borders between divisions resulted in unbalance job load. Self creativity was discouraged and teamwork was weak due to the poor communication between function. Manager involved in all operations; on the other hand, specialists focus on individual contribution rather that working as a team. The role of the headquarters as strategic apex contradicted with the role of the business units as operating core, because the headquarters controlled all and conducted some operational activities. As a result, frequent delay in headquarters’ decisions made the front line unit frustrated and worsens the quality of customer services. PLN had large employees but they were poorly selected and trained, too many administrators not enough technicians, too many senior not enough fresh employees. PLN was over-regulated by government and by itself, resulting in a lack of innovations and inflexibility of decisions.
II. Cultural Approach to Manage the Change
2.1. Cultural Dimension of Indonesia
According to Hofstede (1970), Indonesia is a high power distance society and characterized by a strong paternalistic behavior. Therefore, a role of a strong leader who has interpersonal capability and credibility was important to conduct the change that was conducted by relocating about 700 headquarters employees from headquarters to the front line units.
The second cultural dimension of Indonesia is collective society. In order to success, the change must be run through a consensus among the related parties. In case of the relocation process, both the formal and informal leaders in front-line units and the related supervisors in headquarters should be involved in the relocation process.
The third dimension of Indonesian culture is medium uncertainty avoidance. People do not against the change if they see others’ success. So, the management selected the volunteer from those who had a high readiness for change. They were trained and supported to become the change agent that could promote the benefit of relocation
The fourth dimension is that Indonesia is a moderate masculine society. They like an assertive action and they count performance. The role of men is still dominant and money is considered important. So, the management announced that all managers should work toward the program with certain deadline. Compensation and reward for those who actively involved in this program was given.
2.2. Cultural aspect in PLN change policies
The change focus should be on corporate restructuring with two options of gradual or radical. Eventually, the radical change from the giant pyramid to the pure team based was chosen because the leader thought that the momentum would be lost as soon as the crisis gone. The bureaucratic behavior would come back and the resistance to change would be stronger if the change was only gradual.
Some fundamental change policies are to flatten the pyramid of PLN HQ to be a team-based; to reduce headquarters employees, to delegate operational activities to the unit businesses, and to reassess and renew and core operations managers. During the transition period, the Headquarters organization was run by a pure team-based organization as shown below in Figure 2.
The intervention was done by bottom up approach, began with diagnosing the existing corporate culture and compelling employees about the benefit of new and required corporate culture. Finally, the consensus of a new vision, mission, and value of the company were attained as follows:
Driven by the new electricity regulation that promoted electricity market competition, the following hybrid organization between simple bureaucracy and team-based structure was then accepted by all parties concerned including employees, management, and the board of commissioners. The final structure that was accepted by stakeholders is shown in Figure.
Figure 3: PLN Structure Post Restructuring
The new team based organization was expected to facilitate the self-created task based on the team goal. So, individual and group innovation and creativity can be encouraged. Employees might work cross functionally in a borderless environment, so, the job load could be kept balanced. Interpersonal and inter-group communication and teamwork was arisen. The managers will be characterized by transformational leader who delegate and provide resources while specialists share their knowledge to other individuals or teams.
The caveat for the management was that there should always be a tendency to bring back the power to the central office for the sake of personal interest. It might come from the nature of bureaucratic behavior that might be come back and tempting the core group of PLN. Some critical tasks were to change the human resources mindset at all levels in the organization and setting up a new management principle called competency based human resources (CBHRM).
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