Business Practices in Indonesia

Hierarchies and seniority are highly respected, with the decision-making power concentrated at the top. Managers are the ones who should make decisions, while employees are generally not proactive as taking initiative could be seen as a criticism of the manager and the structures of the organisation. The concept of “Bapakism” (where “Bapak” literally means father) is used to describe the approach to management in Indonesia, with absolute respect being shown to elders or superiors.

The Indonesian approach to business is heavily relationship-focused. Promotion and selection are often based along relationship and family lines rather than on performance criteria.

Negotiations are very slow and at the first meeting little progress is usually made. In general, Indonesians like bargaining and giving concessions too quickly will be viewed as naivete. Verbal contracts are very important and insisting on a written contract is considered to be a breach of trust. In any case, a written legal document is highly recommended afterwards. Indonesians would hardly express disagreement, so understanding what one really means is pivotal (even saying “yes” could be a sign of understanding, not necessarily of acceptance).

As Indonesians are indirect communicators it is important to pay attention to gestures and body language and to read between the lines. People are expected to be moderate in all communication situations. It is important not to be perceived as a threat to the harmony of the group, so it is better to speak in a quiet, gentle voice, and to avoid disagreeing explicitly. Hierarchy plays an important role. Hence during a meeting it is important that the right amount of deference is paid to the senior people present. Before answering a question, it is normal to leave a pause. This pause can at times be seen as quite long by Western standards, nevertheless it should not be broken. At peer level, managers usually reach decisions through a consensus-forming process, which can prove very time-consuming.

Meals should be used as an opportunity to widen the topics of conversation and develop a personal relationship with your counterpart, rather than be focused on business-related matters. Most Indonesians are Muslims and may not drink alcohol or eat pork. Whenever eating, passing or receiving food, use the right hand as the left hand is considered to be unclean. In formal situations, men are served before women. Wait to be invited to eat before you start. Most restaurant include a 10% service charge in their bills; if this charge has not been added it is considered polite to leave an equivalent amount.