Tackling Indonesia’s Talent Challenges

Tackling Indonesia’s Talent Challenges

          
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Tackling Indonesia’s Talent Challenges

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    Where’s the Talent?

    Despite the challenges, there are bright spots in Indonesia. If demographics are destiny, Indonesia is in good shape. It is a young nation without a bulge of older employees approaching retirement, which is the case in Japan, South Korea, and most Western nations. Indonesia has a vibrant and growing middle class. The nation’s economic expansion is largely driven by domestic consumption rather than export-led growth, so it is less dependent on increasingly unpredictable global economic forces. Finally, like so many other emerging markets, Indonesia is an optimistic nation. It has the will to succeed. Companies will now need to accompany that optimism with strong moves to acquire and develop the right talent.

    In a recent survey on people issues conducted by The Boston Consulting Group and the World Federation of People Management Associations, senior executives cited managing talent and developing leadership as the two most critical problems in Indonesia. (See Exhibit 1.) Indonesian companies face both talent quantity and quality issues at all levels throughout their organizations. (See Exhibit 2.)

    exhibit
    exhibit

    At all companies, middle managers are crucial links, translating strategy into concrete business plans, communicating with employees, and managing the business—and most of the people within the business. In Indonesia, the shortage is already acute, and by 2020, a 40 to 60 percent gap between the demand for middle managers and the supply will have developed. When up to half of middle-management jobs are unfilled, companies will struggle to hit their targets, motivate the frontline, and hold on to their overworked middle managers.

    At senior-leadership levels, the pipeline is undeveloped. While modest leadership shortages may occur, the larger constraint is the lack of managerial and leadership experience, including global exposure. The shortage of entry-level candidates, meanwhile, is less severe than is their lack of education, skills, and training, but their numbers will quickly get worse, too. By 2020, top companies will be unable to fill about one-half of their entry-level positions with fully qualified candidates.

    One of the main reasons for these future shortages is the expansion of the Indonesian economy into services. The service sector is expected to rise from 36 to 41 percent of GDP from 2010 through 2015. By 2020, 55 percent of the jobs in Indonesia will be administrative or managerial, compared with 36 percent today. Indonesia is not producing nearly enough graduates to fill these positions, and few of today’s graduates are sufficiently qualified. Only 22 percent of the college-age population is enrolled in a school in Indonesia, a lower percentage than in all of the BRIC nations except India. Top companies say that they only recruit from a small minority of the nation’s more than 1,000 colleges and universities. Bandung Institute of Technology, the University of Indonesia, and Universitas Gadjah Mada are favorite choices among recruiters. Technical skills are also in acute shortage. Indonesia graduates about 30,000 engineers per year, but the economy requires about 50,000, a 40 percent shortfall. By 2025, the engineering shortage will rise to more than 70 percent.

    To make matters worse, almost 60 percent of graduates switch jobs within their first three years of employment, and more than one-third switch jobs two or more times in that period. New employees leave for better offers but also because they are disengaged. Only 20 percent of employees say they are satisfied in their jobs. BCG’s people survey identified an unclear career outlook, insufficient compensation, and a lack of performance evaluation and recognition systems as the top three reasons for their dissatisfaction. (See Exhibit 3.)

    exhibit