How Sukanto Tanoto Handles Malpractices

Sukanto Tanoto has his way of running a business. As a company grows bigger in size, fast and firm accurate decisions have to be made on daily basis from financial to non-financial issues. Managing a big corporation with around 50,000 employees is definitely not an easy job. Given the large pool of employees coming from diversified background and culture, there are inevitable human resources issues to be dealt with. Without a proper system and processes in place, the company will soon collapse due to selfish desires of mankind. A tough leader is also required to instill and drive the system imprelementation till the end. Sukanto Tanoto is someone who plays this role.

Being the Chairman of the company, people tend to look up to Sukanto Tanoto for directions and guidance. In their minds, Sukanto Tanoto is like a superman, someone with extra large capacity and obviously, they have a much higher expectation of his ability to take in stress and difficulties.Given his experiences in life, this is indeed true. However, people tend to forget that he too, has a heart and emotions that are the same as others; He feels sad and hurt when bad things happen and he feels for the people working for him. Nevertheless, he has to be resilient and recover fast enough to take on the next challenge.

One of such instances that Sukanto Tanoto felt hurt was when his senior management betrayed him. He recounts the story below:

Question: How did you react when you discovered mal-practices by some senior local managers in Besitang plywood mill? 

Sukanto Tanoto’s reply: In mid 1970s, Pertamina ran into financial crisis, facing bankruptcy because of widespread corruption and cronyism. It is generally acknowledged that Indonesia has one of the worst records on corruption.

Thus our company was operating in an external environment where corruption was widespread. It was important to ensure that our people be aware of the evil of cronyism and corruption, and that it would not be tolerated within the company. I wanted to build a team of people who would share my conviction by establishing an emotional relationship with them. I did it in two ways.

One was to build an emotional relationship with my key executives, doing the Chinese way with Ang Paw, bonuses, very family approach. I practiced a paternalistic approach to develop my senior staff some of whom were my former school mates.

The second was from the mid 70s, I started recruiting expatriates to join my management team, setting up systems to check and control. We even started to use computers. Externally, we set up systems to deal with ‘special expenses’.  We established few principles. First, the company cannot be involved in corruption. If someone started to take some money, the company would collapse. Second, we tried to establish a family approach and third we build a system to make sure that there are checks and controls. I treated my senior people as part of family. I was generous in rewarding staff who performed well. However I did not pay enough attention.

But it turned out that some of my trusted staff including my most senior manager betrayed me. He was one of the most talented managers who worked for the company. He knew that some of his managers were corrupt but he did not report to me. He wanted to buy support from the staff to consolidate his own position. I smelled it. The corrupted staff took kick backs and built up their own business that had conflicting interest with the company and some of them transferred profit out of related parties transactions. Some of them used the social capital of the company to apply and get license for their own pockets. My dilemma was either to take the Pertamina way leading to collapse or to take action.

I became very upset, emotionally involved. Those people were treated like my brothers, I paid them big bonuses, I developed family like relationships and why they betrayed me? Do something in my back. Some of them were my classmates.

My experience in Belawan, when I was young taught me how to protect myself.  I handled them very severely. I put them into the hand of the police. When I get upset, I really get emotional and aggressive. The business is my life. When I treat you as a family and you betray me and threaten my empire, my life, I react. I got the reputation of being very tough. Some people did not want to join the company for that reason. Most of the Indonesian companies were not as strict as me.

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