INTERVIEW: Effendi Situmorang develops Pertamina's think thank

Effendi Situmorang, who was installed as director of development at the state oil and gas company Pertamina on Jan. 3 this year, is one of few executives of foreign companies who are able to gain top positions in Pertamina, which were for decades controlled by military members and governmental officials.

Effendi, born 49 years ago in Lontung, North Sumatra, spent most of his professional life as a worker of American oil and gas company Atlantic Richfield Company (ARCO), which had extensive operations in Indonesia until it was acquired by BP Amoco last year. The company is now known as Beyond Petroleum (BP).

He started working with Atlantic Richfield Indonesia Inc. (ARII) in January 1975 after graduating from the local prestigious university Institute Technology of Bandung (ITB). He then moved to the United States in 1989 to work with Atlantic Richfield International (ARCO International), where he worked until June 2000.

Effendi, who received the Master of Business Administration degree from the University of Southern California, served a brief stint as vice president of Unocal Indonesia Company before being appointed as Pertamina's director.

The directorate of development is as a matter of fact a new directorate in Pertamina's organization.

Effendi recently explained the scope of his work at the new directorate in a recent interview with Petromindo.Com. Following are the excerpts of the interview.

Q: Could you specify the scope of your directorate's works?

A: The directorate supervises corporate planning, environmental protection, and work safety affairs. These are all important for us to enter the global competition. Once we become a publicly-listed company and are accused of damaging the environment, we'll be finished. The directorate also supervises communication and electronic affairs as well as management planning and service, which include organization development. Next, information technology, human resources, industrial relations, health and education and training affairs.

First in position is corporate strategy. It is followed by human resources backed by information technology (IT). We need information technology to cut a lot of works. Thus, we'll keep bureaucracy in place but it will be accelerated if all human resources are already familiar with IT. IT is not our core business, but we need IT to change Pertamina's working culture more quickly.

As a matter of fact, under the presidential decree, all Pertamina subsidiaries are placed under the supervision of my directorate. But the decree issued by the board of directors on Jan. 4, that is one day after the installment of Pertamina's board directors, places all the (existing) subsidiaries under the supervision of the directorate of finance. The word "development" in the presidential decree could be interpreted as "the development of subsidiaries other than the existing ones". Let people make their interpretation. What is clear is the directorate of development is designed to be the think tank of Pertamina in anticipation of the free market era.

The directorate will formulate a corporate strategy. Are we going to (expand) to Iraq, Nigeria, or remain in Indonesia? This is a problem for the directorate of development. If there are project proposals from the directorates of upstream and downstream, we shall examine if they are feasible or not. There may be a lot of projects but we can evaluate them because I am an engineer.

Q: As far as Pertamina's organization is concerned, are there many things that need improvement?

A: We have a restructuring team, which is still working to form an organization suitable for Pertamina's future goals. The team is expected to complete the formation of the new organization, including the micro organization and its personnel, in February 2001.

Q: How long does it take to implement the IT culture in Pertamina?

A: If the system works properly, I estimate the results will be visible in one month. For instance, when I just arrived, I sent e-mail messages to several people. But, there were no responses. It then asked them if they had opened their e-mails. They said they had not yet had time to do so. What I want is that all people will first open their e-mails on their arrival in the office every morning. It should become a habit and we have to hold a campaign to create the habit.

Q: Is the infrastructure already in place?

A: It is. We have three websites, including Pertamina.co.id and Pertamina.Com, which have never been updated. The public relations office should be given the task of updating them. I have told (the board of directors) that I would to merge the three websites into Pertamina.Com.

We shall make a guideline for the application of IT. IF one unit in the region wants to buy something (related to IT), we shall not object to the plan. But, my directorate should be informed what kind of things it want to buy. What they want to buy should match the infrastructure developed in the headquarters. We shall be involved in in the process of giving approval but won't interfere with bidding process.

Q: Are you sure that the results of the IT culture campaign program will be visible in one month?

A: We have accomplished now is not bad. I have accepted several e-mail messages despite the fact the transmission of the e-mails was not good as I expected. What is important is that they had made quick responses.

Q: How's about human resources development?

A: I am optimistic that the human resources development program will run as expected. There are many good people here. They have to be encouraged to be more outspoken. Now, in my directorate, some people have dared to speak. We thus can get more input and more easily make decisions.

We also have to pay attention at remuneration. We can't compete with the production sharing contractors (PSC) with current remuneration. If we want to compete with PSCs, the salary of our workers should also be competitive. Otherwise, they will easily quit in the future when the free market is already implemented.

Now, what happens is really funny. If a PSC employee reports to a Pertamina official, it is like someone reports to someone whose pay is ten times lower. How can Pertamina display authority in such a situation? The situation is similar with regards the directorate general of oil and gas (Migas). In the United States, Migas is called Mineral Management Service. If the officials from the agency want to conduct an inspection, they will come on their own, without prior notice, using chopper and wearing clean white shirts. I know well what happens there because I used to be a superintendent there. If they come, we can't do anything. They order us to shut down certain wells and await for two minutes to see if the well is leaked or not. If there is something wrong, they will give us a fine notice.

You know well what happens here. If the Migas officials want to make an inspection, they telephone the PSC, asking it to fetch them at the airport. Thus, PSC will prepare themselves. The inspectors then say everything is okay. Of course, they find nothing wrong because everything has been prepared.

Q: Are you going to say that Pertamina will raise the pay of its workers in the near future?

A: It depends on Pertamina's financial strength.

Q: Is the pay hike part of the human resources development program?

A: That is the ultimate goal, but we have first to carry out a selection process. We can set up a new business to select qualified workers. Those who fail to perform in the new business will be asked to leave. It is not because they are stupid. There are many reasons. Maybe, they organization does not fit them. Maybe, they can become richer than Pertamina's president after leaving Pertamina.

Q: How many workers Pertamina should have to be efficient with the current output?

A: We have not yet made a detailed study. I don't want to give a number because it is a sensitive issue. Actually, you can count yourselves what the ideal number is. I am afraid everybody will collapse, if I make comments. You can ask the PSCs," If the (oil) production is at this level, how many workers are really needed?". It is true that (aside from upstream business) Pertamina has also other businesses, refineries and others. But I think it is still overloaded. Pak Baihaki (Pertamina's president Baihaki Hakim) said Pertamina's workers will naturally drop by 7,000 (per year). Actually, we don't need talk about it because it is a natural process. The point is that we want to become a profit-oriented business. The faster, the better. (Alex/Epin)