leadership strategy in smart, tbk

8/13/2019 leadership strategy in SMART, Tbk

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MM 6015

Business Leadership

Lecturer: Dra. Nurul Hermina, MM

FINAL EXAM (UAS)

Part One: Application Concept Analysis PT. SMART, Tbk

Part Two: Personal Analysis Learning Summary

Executive 47

Sufian (29112017)

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUT TEKNOLOGI BANDUNG

2013


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Part one: Application Concept Analysis (Weighted: 60%)

- Choose one of Indonesias Fortune 100 companies : PT. SMART, Tbk

PT. Sinar M as Agr o Resources and Technology Tbk. is a large and established

group and major world player in agro-related industries and consumer goods - one of well

establish conglomerate in Indonesia. (www.smart-tbk.com ). SMART is a subsidiary of

Golden Agri-Resources Ltd (GAR) , which is one of the largest palm-based companies in the

world which is listed on the Singapore Exchange. SMART also manages all of GAR's oil

palm plantations, which has a total planted area of 467,000 hectares (including small holders)

in Indonesia, as at 30 September 2013. PT. SMART Tbk. is an integrated palm-based

consumer company that have owns and manages plantations, mills and refineries which

manufactured branded and unbranded cooking oil, branded margarine, fats and shortening.

SMART's products are divided into three categories: Retail, Industrial and Bulk.

PT. SMART Tbk have large oil palm plantations at Sumatera, Kalimantan, Papua, and

their refineries located in Surabaya (Kawasan Rungkut Industri), Medan (Belawan) ,

Kalimantan Selatan (Tarjun ), and Bekasi (Marunda). Their retail products are designed for

household consumption. Whereas Industrial products are aimed at supplying noodle factories,

confection factories, bakeries, fast food chains, hotels, hospitals, restaurant, and so forth. The

latter category fetches the premium gross margin as customer requirements are tailor-made to

specifications. The branded products cater not only for local but also for international

consumption. Finally, bulk products are unbranded and unpacked goods targeted for mass

consumption.

Whilst for PT. SMART Tbk. upstream operation, they implement an on-going

plantation expansion program and concurrently replanting the old or less productive trees.

The integrated structure within the company has ensured good quality and steady supply of

raw material - CPO for its products requirement at competitive cost. The company hasembarked into an extensive research and development program both at refineries and at

plantation areas to optimize the plantation output in order to cope with the growing demand

of our products.

PT. SMART Tbk. aims to be the leader in sustainable palm oil production by adopting

the best industry practices and standards, managing the environment responsibly and

empowering the communities where its operate while delivering shareholder value. PT.
http://www.smart-tbk.com/http://www.smart-tbk.com/http://www.smart-tbk.com/http://www.smart-tbk.com/


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SMART Tbk. sustainability strategy is implementing the best practices holistically in all

dimensions of sustainability (the environment, community, market place and work place),

benchmarking our practices against the Roundtable on Sustainable Palm Oil ("RSPO") and

the United Nations Global Compact ("UNGC"), and engaging stakeholders proactively.

- Assume you as a CEO, and please answer the following question :

1. A) Whats the problem facing your company?

PT. Sinar M as Agr o Resour ces and Technology Tbk. is one of the biggest players in CPO

business in Indonesia. Its competitor (peers) is PTPN, Raja Garuda Mas, Astra Agro Lestari,

Minamas and Indofood . We are managing more than 50% of plantation estate in Indonesia

and are leading the Indonesian palm oil business. In the process of CPO production, many

types of bio-wastes are generated in plantations and CPO mills. Palm oil plantation generates

waste from solid to liquid waste. Volume of solid waste in oil palm plantation is quite large,

derived from the leaves, stem, and bunches. The graphic below showed the rough estimation

of environmental impacts of oil plantation and CPO mills in Indonesia.

So, our company problem is that palm oil industry gives a bad impact on the environment

and there is also a lot of waste is generated.

B) Whats happen ing with your company performance?

We should view the company performance from its financial ratios for the last five years(2008 2012)

- Income statement in IDR


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In 2012, PT SMART Tbk increased its cash reserves by 143.4%, or 697.26bn. the companyearned 3.41tn from its operations for a cash flow margin of 12.37%. in addition the companyused 1.69tn on investing activities and also paid 1.04tn in financing cash flows.

- Balance sheet in IDR

PT SMART Tbk has a debt to total capital ratio of 20.68%, a higher figure than the previousyears 7.96% . Current assets totaled Rp 7.35 trillion at end of 2012, 8% lower than the

previous year of Rp 7.94 trillion. The decrease was attributable to lower trade accountsreceivable and inventories, in line with the decrease in CPO market prices and theCompanys net sales.

C) What cause that happen?


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I n general, PT SM ART Tbk performance was not very good in 2008 - 2010. It was because we have not implemented the green economics. Though we led the industry in beingthe first palm oil producer to establish a zero burning policy in 1997 but the strategy had not

been aligned or integrated in all system especially in the operational (Value chain).Green economy can only be practiced on the basis of a number of awareness. The

first is the realization that environmental damage is more severe and need rehabilitation now.Based on research by economist, if the world improves the environmental damage now, themoney needed just 1% of global gross domestic product. However, if delayed, the world hadto pay 20% of the global GDP. Second was the realization that environmental stewardshipcan improve economic welfare. In a recent report, the UN shows how emissions reductionscan spur economic growth

A major feature of our policy development in 2011 has been the launch of our ForestConservation Policy (FCP) in February 2011. To build on the FCP and as part of SMART's

holistic approach towards sustainability, we launched a Social and Community EngagementPolicy (SCEP) in November 2011 and a Yield Improvement Policy (YIP) in February 2012.

2. Please explain how to improve your companysperformance (related question number 1 above) witheffective strategic leadership that you learned, pleaseexplain as completely as possible!

PT. SMART Tbk overall approaches towards sustainability. As

part of this process, SMART is always looking for ways toincrease productivity. There are six components of strategicleadership that will lead to enhanced organizational

performance:

Step 1: D etermining strategic directionVision:We aim to be the best; to become the largest integrated andmost profitable palm-based consumer company

Mission:- Surpassing the highest standard of quality- Maintaining the highest level of sustainability and

integrity- Empowering society and community- Trend setting innovation and technology- Achieving maximum value for shareholders


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Step 5: Emphasizing ethical pr actices

The Company recognizes the importance of good corporate governance, and is committed toattaining high standards of good practice, to promote corporate transparency and enhanceshareholder value. The Company has complied substantively with the principles and

guidelines set out in the Code of Corporate Governance 2005 (revised in 2012) issued by theMonetary Authority of Singapore.

Step 6: Establi shing balanced organizational contr ol

- Using GRI Reference Table by Corporate Citizenship (is one of the most establishedand largest, specialist corporate responsibility and sustainability consulting firm, withextensive international experience)

- Using the United Nations Global Compact (UNGC) Reference Table- International Sustainability and Carbon Certification (ISCC)- Roundtable on Sustainable Palm Oil (RSPO) & Indonesian Sustainable Palm Oil

System (ISPO)- Using Balanced Score Card (BSC)

Production strategy: SMART Research Institute implanted using the concept of re-use, re-cover and re-cycle. In facing the challenge of Rio G+ 20, the green economics is essential.Waste can be utilized so it can be used for animal feed and fertilizer sources of organic massused in palm oil plantations. SMART use organic inputs, waste cultivate, build social andyield policies and empower people in its environment. These green economic strategies

provide also sustainable activity for the surrounding community and environment. That can produce a big profit for the company and give good impact to their circle of influences; with

initiatives ranging from education, community development and energy self-sufficiency tohealthcare and disaster relief.

3. To create outstanding result in your company, how do you execute your strategyusing The 4 Disciplines of execution

Using the scope of the economic and social impacts, we shall determine the top priority ofaction plan with 4DX.

A. Focus on the Wildly Important Goals (WIGs):- Innovation to enhance productivity of palm oil production through Research Institute;

to breed palm oil seeds (at least 2 varieties) that are disease resistant, drought tolerantand productive by 2015.

- Keep the commitment to a no deforestation footprint in palm oil operations and work proactively with 90% of our stakeholders to identify ways to prevent deforestation.

- Build good relation with all people and increase the satisfaction level from 6 to 7 (of10) in 2014: Suppliers, labors (staff & workers), customers (traders, distributors,wholesalers, retailers, businesses in the food, catering, restaurant, bakery &manufacturers); consumers (end users); and beneficiaries (social and communities).


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B. Act on the Lead Measures

1. By 2015, GAR aims to achieve an average CPO yield of 5.8 tonnes per hectare and5.6 tonnes per hectare for smallholders, from oil palms in the prime age of 7-18 years.(12% increase from the average CPO yield GAR achieved in 2010).

2. SMART support efforts to preserve the High Conservative Values (HCVs) in the plantation area. SMART will take the following steps to increase the value of naturalresources and biodiversity in these areas:

- Maintain the flora and fauna, especially endangered species

-

Avoid degradation and deterioration- Review the management plan to conserve HCV sustanable- Oversee and enrich the regular HCV or rehabilitated, if necessary. Diversity of flora

and fauna in the plantation maintained by preserving habitat adequately.3. SMART social and economic impacts are spread across the full breadth of value

chain: increase numbers from the supplier to production of palm oil to themanufacturing and sale of products and then through to the wider community.


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C. Keep a compelling scoreboard

1) Annual Report and Sustainability report (compare every year to year achievement)

2) Re-use, Re-cover and Re-cycle table, such as shown below:

3) Quantity numbers growth by weekly, monthly, quarterly and annually for Suppliers,

labors (staff & workers), customers (traders, distributors, wholesalers, retailers,

businesses in the food, catering, restaurant, bakery & manufacturers); consumers (end

users); and beneficiaries (social and communities).

D. Create a cadence of accountability

Conduct effective meeting:- Board of Directors meeting- Coordination meeting (corporate level)- Departmental meeting- Cross Function meeting- Team meeting- One-on-one meeting (performance assesment)- Cooperation meeting (with external)


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Part two: Personal analysis learning summary (Weighted: 40%)

1. What specific ideas about strategic leadership did you arrive with and how havesome of these ideas been transformed?

My ideas of Strategic Leadership TRUE definition of Strategic LeadershipStrategy and leadership is twodifferent thing

Both an organizational and a personal process

The Job of corporate strategy is theresponsibility of top executives

Strategic leadership is a combined responsibilityof the leader, the follower and the organization

Non-flexible due to the documented(fixed) 5-10 years strategic planningand design

encourage innovation in the face of changingenvironments and contexts, seeking innovationand change in moving forward

Usually the followers obey andshould understand leaders point ofview

Effectively influence others (must understand theneeds, know the styles and motivations of others)

Leaders can change the strategicdirection using his/her authority

Building commitment to the organizationsstrategic direction

Implementation can be different aslong as achieving target or meet theneeds of stakeholders &shareholders

Short-term stability and Long-term viability(strategic consistency)

Can create new concept by leaders own understanding and/orperception about the business(organization)

Grounded in a strong understanding of thecomplex relationship between the organizationand its environment

A leader should master all leadershipstyles (All-in-one)

Incorporate visionary and managerial leadershipby simultaneously allowing for risk-taking andrationality

Human resources can be replacedanytime due to necessity and basedon needs (temporary project)

view human capital as an important factor ininnovation and the creation of core competencies

2. What does strategic leadership mean to you?

In general, I agree with all definition of Strategic Leadership written in many documents suchas journals and/or text books; but if I may put it in my own words I would like to defineStrategic leadership as a persons ability to give us the big picture of where we are right now(HERE) and where are we going to (THERE) and how we will get to the destination(roadmap). Strategic leadership should be able to visualized the vision, mission, values,culture, tools, process, etc. all in a real drawing/ picture so that everyone who see it canunderstand and willing (agree) to do their part in order to achieve the vision together.


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- What does execution mean to you?

When the strategy map is already on thetable and seen by all; it is the execution thatwill be the key to open the door of action and

really put us to work and experiencingeverything that we have planned. A goodstrategy and/or successful strategy will only be

proven when we can overcome obstacles andstay on track in our roadmap to outcomes.Execution process will not always smooth andcould take more time than we expected; butwe know our destination and we know how toget there.The formulation should be:

STRATEGY + EXECUTION (+ DETERMINATION) = RESULTS

3. What readings had a particular impact on you and why?

All of the Leadership-theme readings are of special interest to me, because leadershipalways changing by time and by trend. There will always be new theory and/or new conceptof leadership development, whether in business world, politics, and any other organizations.But the new thing I learned from the class is about 4DX. Actually I already knew about theconcept of 80/20 management but the term of 4 disciplines of execution is new to me and I

wonder how we can apply that method in the real world. Pak Priyantono Rudito (MBALecture & HR director Telkom) shared about his experiences using 4DX method in his dailyactivity in many organizations. He admitted that there is no way (impossible) for him to beable to manage everything in various organizations without implementing the 4 discipline ofexecution.

- How have the class discussions changed your ideas and behaviors?

It was a great privileged to be in the same class with executive 46 in the businessleadership class (I am an Executive 47). Its very interesting and fascinating to learn fromother people with many different backgrounds of education and working experiences. Fromthe sharing and discussion in the class, I learned that leadership potential is in all of us andwe are all leaders in our own scope of responsibility; whether as parents in families, staffs incompanies, executives in corporations, or even as entrepreneurship in our own smallbusinesses.

Everyone in the class has their own styles in presenting the case study and analyzesthe problem with a very systematic way (using theory and real world application). Wealways relate the condition to our own nation and try to give our opinion for better solution.It makes me realized that we all still love Indonesia and hope for the better future; and not


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only that, the reason we study in MBA is that we want to become the agent of change in oursurrounding for developing a better generation in Indonesia.

It changed my paradigm in looking at the situation in Indonesia (the politics, theeducation, the social-culture, and the economic development). I would like to contribute forthis nation and give my best to build the great NKRI.

4. How has the coursework broadened your thought-processes in these regards?

Actually in the business strategy class, we have one chapter discussing about strategiclea dership but its very interesting that strategic leadership is brought up as one differentclass in business leadership (MM 6015). Though the process cannot be separated betweenstrategic management with the strategic leadership, still there are some significantdifferences between strategic concepts with the individual (the leaders as person who givethe strategic direction). When I read deeper about this strategic leadership, I found out that

it is a synergistic combination of managerial and visionary leadership. The more I dig aboutleadership material, the more I learned that there are many styles and challenges tobecome a great leader. One real case in Indonesia is the Telkom Corporation; learning fromtheir corporate transformation until they have become as today was not an easy process.Time will keep moving forward, people will change, leaders will surely change, staffs changeall the time, building can change, core businesses can sometimes change too; but thestrategic leadership will leave a strong legacy to the next generations and clear strategicdirection will keep the corporation strong for many years ahead.

5.

What did you or will you do differently after learning more about the concepts andpractices of strategic leadership?

I will develop my leadership skill in the next 5 years and practices my leadership style atmarket place and also try to combine it with strategic leadership method. Strategymanagement is one of the skills I would like to strengthen while in MBA-ITB and also wouldlike to be an expert in creating strategy. I decided to choose Human Capital Management asmy specialty in MBA degree and a s a part of managing the firms resources; strategic leadersmust develop a firms human capital. Effective strategic leaders view human cap ital as a

resource to be maximized not as a cost to be minimized. As a leader, I would like todevelop and use programs designed to train current and future strategic leaders to build theskills needed to nurture the rest of the firms human capital.


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References:

1. http://www.ijtef.org/papers/253-E10036.pdf (the green Economics in PT Sinar Mas

Agro Resources and Technology Tbk). International Journal of Trade, Economic and

Finance, Vol.4, No. 1, February 2013

2. http://www.smart-tbk.com/ (Annual Report 2010, 2011, 2012)

3. http://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FI

NAL.pdf (Sustainability Report 2010, 2011, 2012)

4. Concepts Strategic Management, Competitiveness & Globalization (Part 3 Chapter

12: Strategic Leadership). Hitt, Ireland, Hoskisson. 9 th edition

5. http://www.esi.nagoya-u.ac.jp/h/isets07/Contents/Session05/1003Hayashi.pdf

(Environmental Impact of Palm Oil Industry in Indonesia)

6. http://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subvie

w=Overview (5 years performance overview of PT SMART Tbk)
http://www.ijtef.org/papers/253-E10036.pdfhttp://www.ijtef.org/papers/253-E10036.pdfhttp://www.smart-tbk.com/http://www.smart-tbk.com/http://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.esi.nagoya-u.ac.jp/h/isets07/Contents/Session05/1003Hayashi.pdfhttp://www.esi.nagoya-u.ac.jp/h/isets07/Contents/Session05/1003Hayashi.pdfhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://markets.ft.com/research/Markets/Tearsheets/Financials?s=SMAR:JKT&subview=Overviewhttp://www.esi.nagoya-u.ac.jp/h/isets07/Contents/Session05/1003Hayashi.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.goldenagri.com.sg/pdfs/SGX%20Filings/2013/GAR%20Sustainability_FINAL.pdfhttp://www.smart-tbk.com/http://www.ijtef.org/papers/253-E10036.pdf

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