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The author speaking at a ceremony of Bank Central Asia in 1979. (Photo provided by company)
My Personal History

Bringing efficiency to Salim's bank: Mochtar Riady's story (17)

Given a free hand, I reformed everything from workflow to accounting practices

Under the government of Suharto, the sphere of activities for private companies expanded. I forged a business partnership with the fast-growing Salim Group in banking. The founder of the conglomerate, Sudono Salim (Liem Sioe Liong), was not highly educated, but he was remarkably intelligent.

Whenever he became involved in a new business, Sudono would find the best person to manage it and leave everything to that person.

I wanted to create a clearing bank, that is, a bank involved in the system of finalizing or "clearing" financial transactions. Sudono supported my plan and entrusted me with the management of one of his group's banks, Bank Central Asia. Sudono never intervened in the bank's business operations.

In June 1975, I walked into BCA's office and started studying its workflow. The tasks for each unit were described in great detail in massive documents. I turned these stacks of papers into simple diagrams that depicted the relevant workflow as a sequence of numbered tasks. Each of these tasks was described in a corresponding document. The system was designed so that even new recruits could understand and perform their tasks immediately.

Next, I set out to have documents concerning past business transactions sorted and organized. I found that the bank's document archives was a mess. It was clear that nobody had checked the reams of documents in the office for years. For a bank, records of its past transactions should be a valuable source of future profit. I had the records of the bank's operations from 1960 to 1974 organized by month.

I also revamped the bank's accounting system. I changed the system so that its financial statements showed not only the bank's total profit but also how much profit each transaction generated. With this system, when management trouble arose, solutions could be found by analyzing the information in these statements.

I employed leaders in local business communities and their relatives as senior executives at the bank's local branches, and I trained them for their jobs myself. To help in my recruitment efforts, I ordered lists to be made of local business owners in the country's six major industries in those days -- tobacco, textiles, construction materials, food, automobiles and bicycles. These lists included personal information such as facts about their families, hobbies, assets and character.

It took 20 months to complete these reforms. Starting in 1978, we focused our efficiency-boosting efforts on computerization. It was a complicated task requiring both manpower and time, but I pushed ahead with the project without a moment's hesitation.

In the Taoist classic "Tao Te Ching," the ancient Chinese philosopher Laotzu says, "All difficult things arise from that which was easy, and all great things from that which was small." Laotzu also says, "A journey of a thousand miles starts with a single step."

The success of a business depends on how solid its foundation is.

Until 1985 Indonesia's telecommunication infrastructure was extremely poor and transferring money between banks could take as long as 40 days. Against this backdrop, BCA introduced a next-day remittance service. Since there was no well-developed telecommunication infrastructure, we decided to use trains and other public transportation to carry remittance documents between branches. This service helped convince many new customers to open accounts at BCA.

Many large companies, however, were still unwilling to do business with us. We sought to establish a relationship with Gudang Garam, which was then Indonesia's largest cigarette maker, but to no avail. Even Sudono was unable to win over the company despite his huge clout in the tobacco industry.

I opened a branch near the company's head office and assigned a very sociable executive to work there. This executive soon started playing badminton and tennis with Gudang Garam's financial and sales managers. After a year or so, BCA started doing business with the tobacco company through the two executives.

Another tough nut to crack was Unilever's Indonesian unit. I again assigned an employee to develop personal ties with Unilever's executive in hopes of winning over the company, but the strategy did not work this time.

Changing tack, I ordered that reports on BCA's favorable exchange rates and next-day remittance service be sent to the company by telex every day. After a year or so, Unilever contacted us.

 

Mochtar Riady is the founder of Lippo Group.

Click here to read Mochtar Riady's full "My personal history" series.

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